Embracing the Energy Revolution: A Strategic Approach for Dividend Investors

Introduction: The Energy Transition and Dividend Opportunities

The world is in the midst of an unprecedented energy revolution, driven by two transformative megatrends: the rise of electric vehicles (EVs) and the rapid advancement of artificial intelligence (AI). As a dividend investor, it’s tempting to focus on stocks that provide immediate income. However, sometimes sacrifizing a bit of current yield for the promise of substantial future growth can be a smarter move. The energy sector, particularly in the context of this dual boom, offers a unique opportunity for those willing to look beyond the present and capitalize on the seismic shifts underway.

Trillions of dollars are pouring into electrification and energy storage technologies, creating a potential goldmine for investors who are paying attention. The transformation is so significant that it’s being referred to as the “transition of the century.” With EVs projected to triple in market size by 2033 and lithium demand expected to triple by 2035, the stage is set for awindfall for those who position themselves correctly. In this article, we’ll explore two prime investment opportunities: lithium, the linchpin of the EV revolution, and utilities, the backbone of the power grid that will support this transformation.

The Bullish Setup: Why the Energy Sector is Primed for Growth

The energy sector is undergoing a transformation that will reshape the global economy. The shift from internal combustion engines to electric vehicles is accelerating, with major automakers like General Motors, Ford, and Tesla leading the charge. General Motors reported a 50% year-over-year increase in EV sales, while Ford saw a 38% rise. Tesla’s deliveries are projected to grow by 15% in 2025, further solidifying the trend.

At the heart of this movement is the lithium-ion battery, which accounts for 75% of global lithium production, up from just 40% in 2017. Lithium demand is projected to triple by 2035, and any supply shortages could send prices soaring. This creates a compelling opportunity for investors to tap into the lithium boom. However, it’s important to approach this market with caution, as it is highly volatile and subject to supply chain disruptions and geopolitical risks.

Energy Dividend #1: Lithium – A High-Risk, High-Reward Opportunity

For investors willing to take on some risk, the Global X Lithium ETF (LIT) offers a way to play the inevitable rise in lithium prices. While the fund currently yields just under 1%, the real attraction is its potential for significant capital appreciation. During the last lithium bull run from 2020 to 2021, LIT quadrupled in value. However, lithium prices tanked in 2024 due to oversupply, and LIT followed suit. Industry forecasters remain bearish, and concerns about tariffs on critical minerals like tungsten and indium have spooked Wall Street.

Despite these challenges, there are signs that LIT may have bottomed out after a three-year downtrend. Institutional investors have largely avoided the fund during its decline, but if the big money starts flowing back in, LIT could move higher quickly. For contrarian investors, this could be an opportune time to get in before the market realizes the full potential of the lithium boom.

Energy Dividend #2: Utilities – A Steadier Play for Income and Growth

For those who prefer a steadier ride, blue-chip utility Duke Energy (DUK) is a “must-have” stock for the EV revolution. With a yield of 3.6%, DUK offers a reliable income stream while also positioning itself to benefit from the growing demand for electricity. As more EVs hit the road, the power grid will need to expand, and Duke is already investing in grid upgrades and charging infrastructure in its key markets of Florida and North Carolina.

Beyond EVs, Duke is also poised to capitalize on the AI boom. Data centers, which power AI tools like ChatGPT, are massive consumers of electricity, accounting for 5% of total U.S. consumption. This demand is expected to grow exponentially as AI adoption increases. Duke is well-positioned to serve this growing market, particularly in the tech hubs of Florida and North Carolina. Data centers are ideal customers for utilities, as they sign long-term power agreements, providing predictable and stable revenue.

Duke has also streamlined its operations by selling its commercial renewable energy business to Brookfield Renewable Partners, focusing entirely on regulated businesses that generate steady, growing cash flow. Additionally, the current interest rate environment, influenced by tariffs, could provide a tailwind for utility stocks like DUK. As tariffs potentially cap long-term interest rates, utilities, which trade like bonds, could see their shares rise.

The Future of Energy: Navigating the Opportunities and Challenges

The energy transition is still in its early stages, but the potential rewards for investors who position themselves correctly are enormous. Lithium and utilities represent two sides of the same coin: lithium offers explosive growth potential, while utilities provide stability and income. Both are essential to the transformation underway, and together, they create a balanced portfolio that can weather market volatility while capitalizing on long-term trends.

However, investors must be aware of the risks involved. Lithium’s volatility and supply chain concerns require a nimble approach, making it more suitable as a short-term trade rather than a long-term hold. On the other hand, utilities like Duke Energy offer a steadier path, but their growth may be slower and more predictable. Balancing these two investments can provide a diversified approach to the energy transition.

Conclusion: Positioning for the Energy Revolution

The energy revolution is one of the most significant investment opportunities of our time, driven by the unstoppable forces of EVs and AI. While the current yield may not be the highest, the potential for capital appreciation and steady income makes this sector a must-watch for dividend investors. Lithium, through funds like LIT, offers a high-risk, high-reward opportunity for those willing to take a contrarian stance. Utilities, led by Duke Energy, provide a safer, more reliable path to income and growth.

As the world continues to electrify and rely more heavily on AI, the demand for energy will only increase. Investors who get in early on these trends could reap substantial rewards. However, it’s crucial to approach these opportunities with a clear understanding of the risks and a strategy that aligns with your investment goals. Whether you’re chasing the next big thing in lithium or seeking steady returns from utilities, the energy revolution has something to offer every investor.