Brookfield Renewable vs. Clearway Energy: Which Renewable Energy Stock is a Better Investment?

As the world transitions towards renewable energy, investors are increasingly looking for companies that can capitalize on this trend. Two prominent players in the renewable energy sector are Brookfield Renewable (BEPC) and Clearway Energy (CWEN). Both companies have shown strong performance in recent years, but which one is the better investment? Let's compare their business models, financials, and growth prospects to help you make an informed decision.

Business Models and Growth Strategies

Brookfield Renewable operates one of the world's largest publicly traded renewable power and decarbonization solutions platforms. Its globally diversified portfolio features hydroelectric, wind (onshore and offshore), and solar (utility-scale and distributed energy) assets spanning five continents. In addition to its sizable operating portfolio (37 gigawatts, or GW), Brookfield Renewable is one of the largest clean energy developers in the world, with a massive pipeline of future projects (around 200 GW). It has acquired several renewable energy development companies around the world in recent years to enhance its expertise, increase its scale, and grow its pipeline.

Clearway Energy, on the other hand, has a much more focused portfolio and strategy. It's one of the largest owners of clean energy generation assets in the U.S., with 11.7 GW of capacity across 26 states. It has about 9 GW of wind, solar, and energy storage capacity and over 2.7 GW of natural gas-fired power production capacity. It sold its thermal assets a few years ago and has been recycling that capital into higher-returning renewable energy investments. It has secured several dropdown transactions with CEG to acquire operating renewable energy assets it's developing.

Financial Performance

In 2023, Clearway Energy's revenue was $1.31 billion, an increase of 10.42% compared to the previous year's $1.19 billion. Earnings were $79.00 million, a decrease of -86.43% from the previous year. Clearway Energy's forward annual dividend payout is $1.39, which translates to a dividend yield of 4.05%.

Brookfield Renewable's revenue growth is not explicitly stated in the provided information. However, it is mentioned that the company's long-term average generation increased 4.2% year-over-year to 14,946 GWh in Q4 2021. Brookfield Renewable declared a quarterly dividend of $0.32 per share, payable on March 31st, 2025, representing a 5.3% increase from the prior dividend of $0.30. This suggests a higher dividend yield compared to Clearway Energy.



Growth Prospects

Brookfield Renewable expects a quartet of growth drivers (inflation-linked rate increases on existing PPAs, securing higher market rates as legacy PPAs expire, development projects, and accretive M&A) to power more than 10% annual FFO per-share growth. That growth is highly visible and secured through 2029. It easily supports the company's plan to increase its dividend by around 5% to 9% annually. Brookfield's high-return development program is a big factor driving its higher growth rate. Development projects should add 4% to 6% to its FFO per share each year. On top of that, the company is a serial acquirer, thanks to its relationship with Brookfield Corporation, which manages several renewable energy funds through its Brookfield Asset Management subsidiary. That relationship provides Brookfield Renewable with more capital to fund acquisitions.

Clearway Energy expects a 7.5% to 12.5% compound annual rate from this year's baseline through 2027, which should support dividend growth in the bottom half of its 5% to 8% annual target range. Over the longer term, it expects to deliver 5% to 8%-plus CAFD per share growth each year, supported by additional dropdowns of renewable energy projects developed by CEG. It aims to fund that growth primarily with retained cash after paying its dividend and new debt. That should support dividend growth within that target range.



Analyst Ratings and Price Targets

According to 8 analysts, the average rating for CWEN stock is "Buy." The 12-month stock price forecast is $31.63, which is an increase of 25.27% from the latest price. The average target predicts an increase of 25.27% from the current stock price of $25.25.

The average analyst rating for BEPC stock is also "Buy." The 12-month stock price forecast is $34.00, which is an increase of 33.2% from the latest price. The average target predicts an increase of 33.2% from the current stock price of $25.53.



Conclusion

Both Brookfield Renewable and Clearway Energy have attractive business models, strong financial performance, and promising growth prospects. However, Brookfield Renewable's global diversification, larger pipeline of future projects, and higher dividend yield make it a more compelling investment option. Its higher growth rate, driven by development projects and accretive M&A, also sets it apart from Clearway Energy. Both companies have received "Buy" ratings from analysts, with average price targets indicating significant upside potential. Ultimately, the choice between these two renewable energy stocks will depend on your investment goals, risk tolerance, and time horizon.