About a decade ago, natural gas overtook coal as the primary fuel for the electric utility sector. Coal's use, however, has continued to decline, falling from 19.7% of supply five years ago to 12.2% in May. That same month, solar power supplied 12.8% of the U.S. grid's needs, making it more important than coal for the first time. Five years ago, solar was just 5.4% of the supply.
This could be an important inflection point for renewable power. And it makes stocks like NextEra Energy (NEE 1.59%), Brookfield Renewable Partners (BEP 1.79%), and HA Sustainable Infrastructure Capital (HASI 3.08%) attractive investments. Here's what you need to know to get started with these dividend stocks.
Image source: Getty Images.
NextEra Energy is one of the world's largest utilities, and it is set to get even larger now that it has agreed to buy peer Dominion Energy (D 0.71%). It offers an attractive 2.8% dividend yield, backed by over 25 years of annual dividend increases. But there's an interesting twist here, because the company has two parts to its business.
NextEra Energy's core is its regulated utility operation, which is a slow-and-steady performer. On top of that, it has built one of the world's largest solar and wind power producers. That has been the company's growth engine and will likely remain so for the foreseeable future. The fact that solar has become more important than coal highlights the long-term opportunity. So, in effect, you are getting exposure to two utility operations in one investment, mixing the old with the new. NextEra is a solid choice for conservative dividend investors seeking exposure to clean energy without jumping in with both feet.
Brookfield Renewable Partners owns a globally diversified portfolio of clean energy assets. Its portfolio includes hydroelectric, solar, wind, storage, and nuclear power. It has operations in North America, South America, Europe, and Asia. It is a one-stop shop for anyone seeking direct exposure to renewable and clean power production.
The big story, however, is the highly attractive 4.4% yield. The distribution has trended higher for over a decade, so unitholders have benefited from a growing income stream, as well. That said, Brookfield Renewable Partners isn't a regulated utility; it sells power under long-term contracts. And it actively manages its portfolio, frequently buying and selling assets. It is a solid option for investors who want to buy one investment to get exposure to the entire clean energy sector, but it requires a bit more monitoring than a company like NextEra Energy might need.
For investors who don't want to buy a partnership but still want an attractive yield, HA Sustainable Infrastructure Capital's 4.3% yield might be of interest. That said, it is a bit complicated. It was originally structured as a real estate investment trust (REIT), but gave up that structure in 2024. It is now just a regular corporation.
But, HA Sustainable Infrastructure Capital still does the same basic things it used to. Simplifying things a bit, the company basically provides loans to companies with clean energy assets. That revenue from those assets is what backs the loans. Generally speaking, that means the loans are backed by long-term power supply contracts. The company has increased its dividend regularly, though not every year, since it started paying dividends in 2013. The dividend even survived the conversion from a REIT to a corporation, highlighting management's recognition of its importance to shareholders.
If you are willing to put in a little extra work for a higher yield, HA Sustainable Infrastructure Capital could be a worthwhile clean energy investment. And, like the other two clean energy businesses above, it is poised to grow as demand for solar power and other clean energy alternatives increases.
Coal provides reliable base-load power, while solar and wind are intermittent energy sources. That suggests that coal will play a role in the power grid for years to come. But solar and other clean energy options are clearly the future direction, as solar overtaking coal in May highlights. If you don't have some clean energy exposure, you should probably consider it today. NextEra Energy is the middle-ground option, while Brookfield Renewable Partners and HA Sustainable Infrastructure Capital offer more focused, unique ways to collect high yields in the sector.
Reuben Gregg Brewer has positions in Brookfield Renewable Partners. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Brookfield Renewable Partners and Dominion Energy. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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Solar power generated more electricity than coal in May; this could be a sign to buy clean energy stocks.

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