VANCOUVER (Reuters) - Backing Canada's leading renewable energy companies wasn't just a feel-good venture this past year. It made investors rich as shares of big producers enjoyed market-beating returns.

But the rally — driven by a combination of yield-hungry investors, high payouts and a low interest rate environment — has left investors asking how much upside is still left.

"We continue to see a relentless drive on the yield side. How long can it go on? I don't know," Macquarie Capital Markets Canada managing director Paul Huebener said at a renewable energy conference in Vancouver this week.

"Interest rates around the globe are sitting at record lows and investors are trying to figure out how to earn income."

Producers and developers of power from hydro dams, wind, the sun and biomass have a strong fan base, but their appeal isn't primarily environmental.

Many boast dividend yields above five percent, plus growth prospects that could boost their share prices and payout. Recent Canadian winners include big independent green power producers like Brookfield Renewable Power Fund and Innergex Renewable Energy.

Consistent cash flows from long-term contracts with utilities have brought dividend yields of five to nine percent for Brookfield, Northland Power Income Fund and others, regular income that is increasingly important for investors, especially retiring baby boomers, as bond yields fall.

Canada's benchmark 10-year bond yields about three percent and the S&P/TSX composite index has a dividend yield of about 2.7 percent.

But the dizzying gains in the sector have left many wondering if prices are getting too frothy.

Shares of Innergex, which operates 14 run-of-river power plants and three wind farms, rose more than 70 percent this year.

Northland, which develops and owns wind, solar and hydro projects, and hydro operator Algonquin Power & Utilities Corp. are up more than 19 percent.

"It depends whether you think the yield is sustainable. I think the consensus out there is that it is," said Gregory Payne, a portfolio manager at Investeco Capital Corp., an investment management company specialising in the environment.

"The payout ratios are OK, a little high for my taste, but not at the risk of being downgraded."

Rising fossil fuel prices also help. Oil touched a 25-month high last week and natural gas hit a three-month high.

But many fear high-dividend stocks may be vulnerable to rising interest rates. The Bank of Canada hiked three times this year, bringing its key rate to 1 percent, but it is expected to keep it there well into 2011.

TD Newcrest analyst Sean Steuart argued in a November 1 report that investors should hunt for "fallen angels" — companies that fell short of market expectations.

He recommends Macquarie Power & Infrastructure Income Fund, a mid-sized power producer that cut its dividend earlier this year, and Algonquin, which reduced its dividend two years ago after a flurry of acquisitions.

Some analysts also like cash-hungry, non-dividend-paying developers, whose shares have sunk by as much as a third.

This makes these small firms prime acquisition targets, according to Cormark Securities analyst MacMurray Whale.

"We expect this to result in the developers gaining, while the IPPs (independent power producers) see slower share price appreciation," Mr. Whale said in a recent report.

Shares of many geothermal energy developers recently caught fire following a number of fund-raisings and investments by big-name energy companies.

For Donald McInnes, chief executive of Plutonic Power , a small developer whose first hydro project started up in British Columbia this year, it is only a matter of time before yields drop and the big names lose some cachet.

"Part of it is that the market is correcting itself. As all these investors chase yield, the price of the underlying stock is going up," he said.