Passive Income: 2 Dividend-Paying Energy Stocks I’d Buy Now and Hold Forever

These two energy stocks can provide an investment portfolio with both passive income and market-beating returns.

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Renewable energy is one of the few areas of the market that has had a positive year so far in 2022. But even after a strong first seven months of the year, many top renewable energy stocks are still trading below all-time highs set in early 2021.

I’d encourage any long-term investor to have exposure to the growing renewable energy space. The tailwinds are clearly there, and I don’t expect the demand for renewable energy to begin slowing down anytime soon.   

In addition to long-term growth potential, most renewable energy stocks on the TSX also pay generous dividends. Yields have dropped in recent months, as stock prices have risen, but there are still some very impressive dividends for renewable energy investors to choose from.

I’ve reviewed two high-quality renewable energy stocks. Both have been consistent market beaters in recent years in addition to also paying out dividends. 

Brookfield Renewable Partners

Out of the two companies, Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) is the only one I own. It’s also the company that I’d recommend first to anyone looking to invest in renewable energy stocks.

At a market cap of over $30 billion, Brookfield Renewable Partners is a global leader in the space. The company offers a range of different green energy solutions to its customers across the globe.

Excluding dividends, the S&P/TSX Composite Index has returned just about 30% over the past five years. In comparison, Brookfield Renewable Partners has gained close to 125%. 

In addition to largely outperforming the market, the company also pays a generous 3% dividend yield at today’s price.

Good luck trying to find another stock on the TSX that can combine a 3% dividend yield with that type of market-beating growth. And once you factor in the company’s established global presence, you can see why Brookfield Renewable Partners is a strong buy for me.

Shares may be up more than 10% on the year but are still down close to 20% from all-time highs. At the rate the dividend stock has been performing over the past month, though, it may not be long before Brookfield Renewable Partners is setting a new all-time high.

Northland Power

Market cap aside, Northland Power (TSX:NPI) provides investors with a similar offering to Brookfield Renewable Partners. 

At a market cap of $10 billion, Northland Power lacks size compared to the global leaders. You could argue, though, that there’s more growth to capture in the coming years.

Shares have returned 80% over the past five years. That’s nowhere near Brookfield Renewable Partners’s performance, but it’s still good enough to double the returns of the broader market. 

The dividend stock is currently trading at a gain of 15% on the year but is still down just over 10% from all-time highs set in 2021.

At today’s stock price, the company’s annual dividend of $1.20 per share yields just under 3%.

Foolish bottom line

Some investors may favour a more dependable global leader, like Brookfield Renewable Partners. While others may opt for a smaller-sized company with more long-term growth potential. 

If you’re struggling to decide which company is right for your portfolio, there’s any easy answer. Pick up shares of both. There’s absolutely nothing wrong with owning two competitors in a growing market. 

There’s no doubt in my mind that these two dividend-paying companies will continue to be market beaters while also generating passive income for years to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nicholas Dobroruka has positions in Brookfield Renewable Partners. The Motley Fool has no position in any of the stocks mentioned.

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