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To help investors like you navigate this historically uncertain — yet high-flying — market and prepare for an inevitable downturn, we’re re-opening our Motley Fool Pro Canada service to a select few new members for a short time.

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2 Stocks for Income and Some Growth Too

In an uncertain market, especially one that leans towards the expensive side, reasonably valued stocks that offer big dividend yields that are growing at a pace faster than inflation are particularly valuable.

Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) and Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) offer yields of 6.5% and 5.4%, respectively. That’s partly the result of their U.S. dollar–denominated distributions. As long as the greenback remains strong against the loonie, unitholders can expect to continue receiving these outsized yields.

What if the greenback weakens against the loonie?

In a more conservative scenario, US$1 would convert to CAD$1.20 (instead of north of CAD$1.30, as it is now). In such a scenario, based on their recent trading prices of $38.40 and $29.20, respectively, Brookfield Renewable would yield 5.8% and Brookfield Property would yield 4.8%. Even if this happened, their yields would still be attractive.

Distribution growth expected

Most importantly, unitholders can expect their income from these investments to continue to grow every year. Management expects to grow the distributions by at least 5% per year. This growth can mitigate the effect of a weaker greenback against the loonie should it occur.

Is the management to be trusted?

Brookfield Asset Management Inc. (TSX:BAM.A)(NYSE:BAM) is the general partner and manager of Brookfield Renewable and Brookfield Property. In fact, Brookfield Asset Management owns significant stakes of more than 60% in both partnerships.

Other than earning management fees from them, Brookfield Asset Management also generates 70% of its distributable cash flows from them. As a result, management’s interests are aligned with those of unitholders. So, it will be inclined to continue growing the partnerships’ distributions as it’ll be paying itself more as well.

office building

Of Brookfield Renewable and Brookfield Property, which is better?

Brookfield Asset Management has invested 54% of its capital in Brookfield Property and 12% in Brookfield Renewable. The fact that Brookfield Asset Management has more skin in Brookfield Property doesn’t make it a better investment.

It just implies that there are more opportunities in the real estate space than there are in the renewable power space or that real estate assets cost more than renewable power assets.

Investors should ask themselves if they want a piece of the businesses.

Brookfield Renewable has 10,700 MW of installed capacity across 260 power-generating facilities in 15 markets in seven countries. The company generates 88% of its power with hydroelectric facilities and 11% with wind power. About 90% of its cash flows are contracted, which improves the stability of its cash flows.

Brookfield Property has 80% of its portfolio invested in core office and retail assets, and 20% are invested in quality opportunistic investments across the sectors of multifamily, industrial, hospitality, triple net lease, self-storage, and student housing, which aim for higher returns. It has a focus in the United States (about 70% of assets under management) and the U.K. and Europe (about 16%). It also has assets in Asia, Australia, and Brazil.

Other considerations investors should ponder about is valuation and income generation. Brookfield Property is cheaper in the valuation sense and has a lower payout ratio. However, for the same investment, it generates lower income than Brookfield Renewable.

Investor takeaway

Both Brookfield Property and Brookfield Renewable are great for income. Moreover, their distributions are expected to grow at least 5% per year.

Brookfield Property offers a safe 5.4% yield at an attractive valuation. Brookfield Renewable offers a higher yield of 6.5% supported by a higher normalized payout ratio. To get the best of both worlds, investors might consider investing in both companies for blended risk, yield, and growth.

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Fool contributor Kay Ng owns shares of Brookfield Property Partners and Brookfield Renewable Energy Partners. The Motley Fool owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.

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