Amidst all the hype around the technology, artificial intelligence and fintech sector, we have lost sight of some of the high-potential energy stocks. The energy sector did see a slowdown last year, but as the economy improves, we could see improved attention to it. With an improvement in the global economy, we could see a higher demand for oil and gas, which could increase their prices. The government hasn’t lost sight of its long-term goals of renewable energy adoption, and energy stocks will pick up soon. While energy companies have reported impressive quarterly results, their stock hasn’t moved, and if you are looking for stocks that can generate passive income and have upside potential, here are the three energy stocks for passive income to consider.
NextEra Energy (NEE)
One of the most popular green energy companies, NextEra Energy (NYSE:NEE), has a strong presence in generating wind and solar energy. It is a blend of two businesses: renewables and utilities. As one of the largest utility companies, it continues to generate steady income, but the renewables segment has slowed in 2023. NEE stock is down 10% year to date and is trading at $55 today.
However, this could be the year when the stock picks pace. The government is expected to continue focusing on renewable energy, and this is where NextEra Energy will benefit. It has reported impressive financials with a revenue of $6.87 billion, up 11.5% YOY, and an EPS of $0.53.
Since it has a utility business, it is one of the more resilient businesses in the renewable energy sector and is one of the best dividend stocks to own. The management expects to grow the dividend per share at 10% per year in 2024 and aims to increase solar generation. NEE has a dividend yield of 3.38% and pays a quarterly dividend of $0.47.
The company expects the earnings growth to range from 6% to 8% through at least 2026, which means steady growth for the next two years. Global adoption of renewable power will drive the company’s growth, and we could see more dividend hikes in the coming years.
Brookfield Renewable Partners (BEP)
Another energy stock, Brookfield Renewable Partners (NYSE:BEP), is an excellent buy for passive income. The management fund has a range of energy companies under its portfolio across different sectors. Like all other energy stocks, the company didn’t have a good 2023 but ended the fourth quarter well.
BEP enjoys a dividend yield of 5.64% and recently announced a 5% dividend distribution increase. Not many dividend-paying stocks yield over 5%; most importantly, this dividend is sustainable. Its dividend has grown by at least 5% in the last ten years.
The company’s financials were impressive, with record funds from operations at $1.1 billion, up 7% YOY, and it added 5,000 MW of capacity and committed $9 billion in growth. The investments will pay off in the long run, and we could see more dividend hikes. Its most successful segment was solar, which could drive major revenue this year. Acquisitions drive the company and while it is hard to include its value in the stock price today, its investments have paid off in the past, and the same will continue in the long-term.
Trading at $23 today, the stock looks undervalued to me, and investors must keep in mind that BEP is all about passive income and not record share prices. The stock has been moving from $20 to $31 in the past year, down 16%. However, this dip could be a strong opportunity to buy.
Linde (LIN)
Linde (NASDAQ:LIN) doesn’t garner as much attention as it deserves. The company handles the distribution of gases and has customers across multiple industries. It provides the infrastructure needed to transfer the gases and ensures steady income year after year. It generates a significant amount of cash, which helps the company maintain a dividend yield of 1.23% and a quarterly dividend of $1.28.
Linde does not rely much on debt and has invested huge amounts of cash back into the business. The company has recently announced a $1.8 billion investment in clean energy supply for the world-scale blue ammonia project. It aims to invest $50 billion globally in the coming years.
Fundamentally, Linde has a strong balance sheet and reported a NON-GAAP EPS of $3.59 and a revenue of $8.3 billion, which is up 5% YOY. It beats analyst expectations and sets the tone for a strong year ahead. The company has several agreements that keep generating steady revenue, and while the stock isn’t cheap at $416, it is worth a long-term buy. The company has immense potential to grow and deliver strong returns.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
