The US energy sector is at an inflection point. After barely growing over the past two decades, the country’s electricity demand is expected to rise over the next two decades. That should stimulate explosive growth in renewable energy.
Few companies are better positioned to benefit from the expected surge in U.S. energy demand than companies NextEra Energy(NYSE: NO) And Brookfield Renewable(NYSE: BEPC)(NYSE:BEP). That makes them no-brainer stocks buy to take advantage of the revival in the US energy sectors.
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Electricity demand in the US has increased over the past two decades, growing 9% between 2000 and 2020 to 3.8 terawatt hours (TWh). According to a recent forecast by IHS, the country’s energy demand will increase by as much as 2.1 TWh, or 55%, by 2040. Several catalysts will drive that increase, including the electrification of the transportation sector, deshoring of manufacturing and increased digitalization. , including the rise of energy-hungry AI data centers.
The country will need to build a huge amount of new electricity generation capacity in the future, mainly powered by low-carbon sources due to climate change concerns. According to one estimate, the country will need to build 375 gigawatts to 400 gigawatts (GW) of new energy. renewable energy capacity in the next seven years alone. That is three times more capacity than has been built in the past seven years.
NextEra Energy is one of the few companies with the scale and expertise to develop significant renewable energy capacity in the coming years. The company currently operates 38 GW of renewable energy and storage capacity across its electric utility, Florida Power & Light (FPL), and energy resources segments. That’s one of the largest portfolios for renewable energy generation in the world.
The company’s energy resources segment currently has 24 GW of projects in its backlog that it expects to complete in the coming years. In addition, it recently signed contracts to build an additional 10.5 GW of projects for two major enterprise customers through 2030. Meanwhile, FPL is working to double its solar panel installations from 15 million (4 GW) in 2022 to 30 million panels by next year.
NextEra Energy plans to do just that more than double the renewable energy and storage capacity to 81 GW by 2027. In the long term, the company has more than 300 GW of renewable energy and storage projects in its development pipeline. It also plans to deploy hundreds of millions of solar panels at FPL by 2045 to produce 90 GW of power.
These investments should generate powerful energy total return for investors. NextEra Energy expects to grow adjusted earnings per share at or near the high end of its annual target range of 6% to 8% through 2027, while increasing its dividend (nearly 3% yield) by about 10% annually through 2026. and the company could achieve double-digit total returns annually for years to come.
Brookfield is Renewable Also are among the few companies with the scale to be a leader in capitalizing on the expected increase in energy demand. The company has an operational capacity of 37 GW worldwide. While it has a global platform, Brookfield has a strong presence in the US after acquiring several renewable energy developers in recent years. It agreed to invest up to $2 billion in Scout Clean Energy and Standard Solar in 2022 and bought them Duke Energy‘s commercial renewable energy platform for $1.1 billion by 2023.
The company currently has as many as 200 GW of projects in various stages of development, including 65 GW in the advanced pipeline. Brookfield expects to commission an average of 10 GW of capacity annually in the coming years. This includes 10.5 GW Microsoft in the US and Europe in the period 2026 to 2030.
These projects help support the robust growth profile. It expects development projects alone to add an average of 5% to operational resources (FFO)d per share annual in the coming years. Add to that higher energy prices and increasing acquisitions, and Brookfield believes it can grow its FFO per share by more than 10% annually over the next decade. That should give the country the strength to increase its dividend (almost 5% yield) by 5% to 9% per year. Add that up and Brookfield Renewable could deliver annual total returns in the mid-teens from now on.
The US will have to develop A enormous quantity of sustainable energy capacity in the coming years. NextEra Energy and Brookfield Renewable are among the few companies with the scale, expertise and financial capacity to be leaders in developing new renewable energy capacity. It should drive robust growth, which when added to their dividends should allow them to generate attractive dividends total return for investors. That makes them look like no-brainer stocks buy to take advantage of this huge megatrend.
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Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners and NextEra Energy. The Motley Fool holds positions in and recommends Microsoft and NextEra Energy. The Motley Fool recommends Brookfield Renewable, Brookfield Renewable Partners, and Duke Energy and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 No-Brainer Energy Stocks to Buy to Take Advantage of the Coming Power Surge was originally published by The Motley Fool
