Updated 3/6/25
Clearway Energy, Inc. (CWEN) is one of the leading renewable energy companies in the United States, focusing on wind, solar, and natural gas power generation. The company operates a portfolio of long-term contracted assets that provide a steady cash flow, making it an interesting option for dividend investors.
Investors looking for a reliable income stream often turn to utility and infrastructure stocks like Clearway due to their stable business models. However, while CWEN offers an attractive dividend yield, questions remain about the sustainability of its payouts given its financial structure and debt levels. Let’s take a deeper look at what this stock offers for income-focused investors.
Key Dividend Metrics
📌 Dividend Yield: 6.31% (Forward)
📌 Annual Dividend Rate: $1.72 per share
📌 Payout Ratio: 220.61% (A warning sign)
📌 5-Year Average Yield: 4.77% (Current yield is well above average)
📌 Dividend Growth: Moderate, but future increases may be limited
📌 Ex-Dividend Date: March 3, 2025
📌 Dividend Payment Date: March 17, 2025
Dividend Overview
Clearway Energy offers a generous forward dividend yield of 6.31%, which is well above its five-year average of 4.77%. Typically, when a stock’s yield is significantly higher than its historical norm, it can indicate an opportunity—or a warning sign.
One immediate concern is the payout ratio, which currently sits at an alarming 220.61%. A healthy payout ratio for most dividend stocks is below 80%, allowing room for future growth and financial flexibility. A ratio over 200% means the company is paying out more in dividends than it earns in net income. This raises questions about how sustainable the dividend truly is in the long run.
The company has been consistent with its payouts, but its ability to maintain or increase the dividend depends largely on cash flow rather than reported earnings. As a renewable energy firm with long-term power purchase agreements, CWEN does have predictable revenue streams, which could help support the dividend even with a high payout ratio.
Dividend Growth and Safety
Dividend safety is a crucial factor for income investors, and here’s where things get tricky for Clearway. While it has a solid operating cash flow of $770 million and levered free cash flow of $693.63 million, the company’s financial structure raises some concerns.
The most pressing issue is the debt load. Clearway carries $7.76 billion in total debt, with a debt-to-equity ratio of 139.45%. That’s a hefty amount of leverage for a company relying on stable but slow-growing revenue streams.
While Clearway’s current ratio of 1.49 indicates it can cover its short-term obligations, the high debt levels may limit its ability to increase the dividend in the future. If interest rates remain high, refinancing that debt could become costly, eating into cash flow that might otherwise be used to fund dividend payments.
Another factor to consider is the company’s profitability metrics. With a return on equity of -1.19% and a return on assets of just 0.88%, Clearway isn’t generating strong returns relative to its capital. That’s not an immediate deal-breaker for a utility-like business, but it does mean the company needs to carefully manage its cash flows to sustain its dividend policy.
Chart Analysis
Moving Averages and Trend Direction
The chart for Clearway Energy (CWEN) shows a mixed technical setup, with both the 50-day moving average (orange line) and 200-day moving average (blue line) in focus. Earlier in the year, the 50-day moving average was well above the 200-day, indicating a strong uptrend. However, as the months progressed, the price weakened, leading to a bearish crossover in December, when the 50-day slipped below the 200-day.
Recently, the stock has been trading around both moving averages, suggesting a period of consolidation. The latest price action shows CWEN pushing back above the 50-day moving average, which could indicate an attempt at regaining upward momentum. However, the 200-day moving average still sits just above the price, potentially acting as resistance.
Recent Price Action and Volume
The stock closed at $27.33, after opening at $26.99, reaching a high of $27.34, and a low of $26.77. The daily range was relatively tight, showing mild intraday volatility.
One notable observation is the volume spike in recent trading sessions, suggesting increased participation. A rise in volume alongside price increases can signal growing bullish interest, whereas volume spikes without meaningful price movement may indicate indecision.
The volume bar pattern also reflects several instances of strong selling pressure, particularly in November and late January, which corresponded with price declines. Recent volume trends appear more balanced, with a mix of green and red bars, reinforcing the idea of consolidation rather than a clear breakout or breakdown.
Relative Strength Index (RSI)
Looking at the RSI indicator at the bottom of the chart, the stock has been hovering in a neutral range, neither overbought nor oversold. In the past, RSI spiked near 80 during rallies and dipped closer to 30 during corrections. Currently, RSI remains moderate, implying that there’s no extreme momentum in either direction.
This positioning suggests that the stock isn’t in immediate danger of a strong reversal due to being overextended, nor is it at an obvious bargain level where buyers might rush in.
Candlestick Behavior
Focusing on the last five candles, the price action shows a mix of indecision and mild bullish sentiment. There are wicks on both ends of the candles, which means that buyers and sellers are still battling for control.
- Several candles have long lower wicks, indicating that buyers are stepping in at lower levels to push prices back up.
- The most recent candles show a slight upward tilt, but the absence of strong bullish candles suggests hesitation.
- The rejection near the 200-day moving average could mean that sellers are still present at resistance.
This behavior aligns with the broader theme of consolidation, where price is searching for direction before making a more decisive move.
Analyst Ratings
Recent analyst activity for Clearway Energy (CWEN) shows a mix of optimism and caution, with upgrades highlighting growth potential and downgrades focusing on industry challenges.
📈 Upgrades:
🔹 Morgan Stanley – On July 31, 2024, Morgan Stanley upgraded CWEN from “Equal-Weight” to “Overweight” and raised the price target from $25 to $36. Analysts cited an improving operational outlook and a more favorable regulatory environment for renewable energy as key drivers behind the upgrade.
🔹 Jefferies – On September 20, 2024, Jefferies initiated coverage with a “Buy” rating and set a price target of $35. The firm expressed confidence in Clearway’s growth trajectory, pointing to its well-structured contracts and long-term visibility in cash flow generation.
📉 Downgrades:
🔻 RBC Capital – On October 27, 2023, RBC Capital maintained a “Sector Perform” rating but adjusted its price target from $26 to $25. The firm cited concerns over macroeconomic headwinds impacting the renewable energy industry, as well as valuation risks given the company’s debt load.
🔻 Morgan Stanley – Before its recent upgrade, Morgan Stanley had previously lowered its price target on October 3, 2023, from $27 to $23 while maintaining an “Equal-Weight” rating. This earlier downgrade was based on short-term industry uncertainties, including supply chain constraints and rising borrowing costs for renewable projects.
🎯 Consensus Price Target:
Analysts have set a 12-month consensus price target of $34.17 for Clearway Energy, indicating potential upside from current levels. The range of ratings reflects a balance between optimism about the company’s long-term prospects and concerns over industry-wide challenges that could impact short-term performance.
Earning Report Summary
Clearway Energy’s latest earnings report paints a picture of a company navigating both growth and challenges. The numbers show progress in some areas, but also some hurdles that investors should keep an eye on.
Fourth Quarter Performance
Revenue for the fourth quarter came in at $256 million, up slightly from the $249 million reported in the same quarter last year. While that’s an improvement, it didn’t quite meet what analysts were hoping for, as expectations were set closer to $308 million.
Net income was a bit of a letdown, landing at $3 million, which translates to just 3 cents per share. That’s a steep drop from 32 cents per share in the previous year’s fourth quarter. The market had expected a little better, with estimates sitting around 13 cents per share.
On a more positive note, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed to $228 million, compared to $201 million last year. That’s a sign that the company is running more efficiently, even if profitability remains a challenge.
Full-Year Performance
Looking at the full year, Clearway pulled in $1.37 billion in revenue, an increase from $1.31 billion the year before. However, the company reported a net loss of $63 million, a notable decline from $14 million in losses the prior year. A big chunk of this is due to rising operating costs and higher depreciation expenses tied to new investments.
On the cash flow side, things look healthier. Operating cash flow hit $770 million, up from $702 million in 2023. Cash available for distribution (CAFD), a key metric for dividend investors, came in at $425 million, surpassing what the company had projected.
Investments and Growth Plans
Clearway is continuing to invest heavily in expanding its renewable energy portfolio. In 2024, the company allocated $450 million toward new projects, including a 320 MW storage hybridization portfolio and a 335 MW wind repowering project. They also locked in a deal to acquire a 137 MW wind project, all of which should help strengthen their position in the clean energy space.
Dividend Update
One thing income investors will appreciate is that Clearway raised its quarterly dividend again—this time by 1.7 percent, bringing it to $0.4312 per share (or $1.7248 annualized). This marks the eighth consecutive year of dividend growth, reinforcing the company’s commitment to returning value to shareholders.
What’s Next?
For 2025, Clearway is sticking to its guidance, expecting adjusted EBITDA to land between $1.195 billion and $1.235 billion. Cash from operations is projected between $844 million and $884 million, while CAFD should range from $400 million to $440 million. These numbers suggest that despite some short-term setbacks, the company remains confident in its long-term growth.
Overall, Clearway’s latest results highlight both strengths and areas that need improvement. The company is making strategic investments, increasing its cash flow, and rewarding shareholders, but it still faces challenges with profitability and costs. Investors will want to watch how these factors play out in the months ahead.
Financial Health and Stability
A dividend stock is only as strong as the financial foundation supporting it. For Clearway, there are both positives and negatives to consider.
On the revenue side, the company brought in $1.37 billion over the trailing twelve months, with a slight year-over-year increase of 2.8%. Gross profit sits at $870 million, but the company’s profit margin is just 6.42%, and its operating margin is negative at -12.89%.
The steep decline in quarterly earnings growth, down 91.90% year-over-year, is another red flag. A company experiencing such a drastic earnings drop may struggle to maintain a high dividend yield, particularly if economic conditions shift or financing costs increase.
That said, Clearway does benefit from long-term contracts that provide a steady stream of income. These contracts help cushion revenue fluctuations, but investors should still be mindful of the broader challenges facing the renewable energy sector.
Valuation and Stock Performance
At a current price of $27.33 per share, Clearway trades at a trailing price-to-earnings (P/E) ratio of 36.44 and a forward P/E of 21.19. While a lower forward P/E suggests improving earnings, the company still appears relatively expensive compared to its growth rate.
Some additional valuation metrics:
- Price-to-book ratio of 1.56, which indicates the stock is fairly valued relative to its assets
- Enterprise value-to-EBITDA ratio of 9.76, suggesting the stock isn’t overvalued but isn’t a deep bargain either
- 52-week range of $20.63 to $30.92, meaning it’s currently trading near the midpoint of its yearly range
Stock performance has been somewhat choppy, and Clearway has underperformed broader markets. This is partly due to macroeconomic factors affecting renewable energy stocks, particularly rising interest rates that make capital-intensive businesses less attractive to investors.
Risks and Considerations
1️⃣ Dividend Sustainability: The high payout ratio raises concerns about how long the company can maintain its current dividend level without improving earnings or free cash flow.
2️⃣ Debt Load: Carrying over $7.76 billion in debt means Clearway has limited financial flexibility, especially if borrowing costs rise.
3️⃣ Sector Challenges: The renewable energy sector has faced headwinds, including delays in projects, funding difficulties, and shifting government policies.
4️⃣ Earnings Volatility: A 91.90% decline in quarterly earnings growth is a significant warning sign that could impact dividend stability.
5️⃣ Stock Price Fluctuations: While dividend stocks typically provide stability, Clearway’s share price has been volatile, which could concern investors looking for a safe-haven income play.
Final Thoughts
Clearway Energy offers an attractive yield that may tempt income investors, but there are clear risks to consider. The high payout ratio, declining earnings growth, and significant debt burden all point to potential challenges ahead.
That being said, the company benefits from long-term contracts that generate consistent revenue, which could help support its dividend in the near term. Investors should keep a close watch on financial reports, particularly any updates on debt refinancing and cash flow trends, to gauge the long-term sustainability of the dividend.
For those seeking steady income, Clearway presents an interesting opportunity, but it’s not without risks. As with any high-yield stock, understanding the full financial picture is essential before making any investment decisions.
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