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You can often count on the reliable earnings and generous dividends offered by utility stocks, which are still undervalued and under-represented in many portfolios. For more aggressive investors, Clearway Energy, Inc. (CWEN) fits the bill, advises Roger Conrad, editor of Conrad’s Utility Investor.

Will the US economy avoid a hard landing? Has inflation really been tamed, or is it ready to flare up again? Will the Federal Reserve continue its pivot to lower interest rates? And how hard will the incoming Trump Administration push its campaign promises?

Investors should be asking all those questions as we transition into 2025 — especially with nearly one-third of the S&P 500 weighted to just 6 “Big Tech” stocks, all currently priced to perfection. But utilities like Clearway Energy remain attractive.

The company has posted steadily growing cash flow and dividends by adding long-term contracted power generation since former parent NRG Energy Inc. (NRG) launched it as NRG Yield in the previous decade. Additionally, it has accelerated growth this decade under Clearway Group (54.91% of voting shares, 42.12% economic interest), which is owned by TotalEnergies SE (TTE) and Blackrock/GIP.

The company plans to announce Q4 results on Feb. 21. Current guidance is for 7.5% to 12% compounded annual growth for cash available for distribution (CAFD) through 2027, with 5% to 8% dividend growth. That’s off a yield recently close to 6%.

The primary fuel for growth is drop-down acquisitions of fully contracted renewable energy assets developed by Clearway Group. Those now include five gigawatts of generation assets co-located with data centers.

Over the past 12 months, Clearway-contracted solar output has increased by more than 60%. Overall renewable energy generation is up 27%. The two largest ongoing expansion efforts are a 500-megawatt solar-plus-storage facility in Texas, which is expected to reach commercial operation in 2025, and a drop down of 320 MW of “storage hybridization” projects entering service in 2026.

The company also owns an increasingly valuable portfolio of natural gas generation that’s vital to California’s power grid. These assets could be sold at a lucrative price in coming years. In the meantime, they’re a reliable source of cash flow, balancing off changeable wind and solar conditions.

As for financing, Clearway will fund the bulk of its 2025-2027 funding plans with cash flow. That’s a good place to be right now, with investors generally wary of renewable energy stocks following US elections.

With Clearway posting solid results, it’s only a matter of time before investors lose their fear and this stock takes out its all-time high in the mid-30s.

About the Author

Roger Conrad has successfully advised income investors since the 1980s, with a nationally acclaimed sector specialty in utilities, telecommunications, and energy. He's a managing partner at Capitalist Times and author of the book Power Hungry: Strategic Investing in Telecommunications, Utilities, & Other Essential Services.

Mr. Conrad is also an independent director of the NYSE-listed Miller Howard high-income equity fund and a contributing editor to Forbes.com.

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