Canadian renewable energy securities aren’t just a great way to help make the world a better place by helping accelerate the transition to sustainable energy, but they’re also a really profitable way to invest! Not just for income investors who desire a high yield, but for investors who want the best of both worlds, a high, growing dividend or distribution, and a decent chunk of capital gains. And if you’re a morally conscious investor, that’s just another bonus that comes with investing in renewables!
With renewable energy stocks, you’re getting businesses with predictable revenue streams and above-average growth profiles versus the average boring utility stock that retirees and risk-averse investors love to own. That means a rock-solid dividend or distribution that will likely remain intact through the worst of recessions. Who knows? A dividend or distribution hike may even be in the cards at a time when the average stock is slashing its dividend and outlook!
If you’re wondering what stocks you should be looking to own with your $5,500 TFSA contribution for the new year, renewables are a great place to start. You’ll get the high dividend to pad volatility and a much higher dividend in five years from now.
Here are two solid renewable energy stocks that you should probably pick up if you haven’t jumped on the renewable bandwagon yet:
When it comes to stability, predictability, growth, and dividends, it’s hard to beat Algonquin, a renewable energy and regulated utility firm with assets in the U.S. and Canada. In addition to the company’s promising renewable assets (hydroelectric, wind, solar), Algonquin also provides Canadians with exposure to one of the world’s most precious commodities — not oil, but water.
With water utilities operating in major U.S. cities, Algonquin offers Canadians a rare opportunity invest in one of the most stable types of utilities out there.
Algonquin is a wonderful business with unique and remarkable assets, and at a 28.98 trailing price-to-earnings multiple, I think investors are getting huge value relative to the quality of the company’s underlying assets. While you wait for the stock to appreciate, you can collect a fat 4.2% dividend yield that’ll likely grow by a fair amount each year.
For those who are hungry for more income, Brookfield Renewables may be the security that you’re looking for with its 5.44% yield. Over the last five years, Brookfield Renewables hasn’t returned as much to investors in the capital gains department (52% versus Algonquin’s 109%), but after acquisitions that have laid down a foundation for future projects, there are many reasons to believe that Brookfield Renewables could make up for lost time over the next few years.
With 169 MW worth of completed capacity slated for the next two years, approximately US$20.7 million in FFO can be expected. Brookfield Renewables’s shares are quite volatile, so if you can accumulate more during dips, you’ll likely set yourself up for market-crushing returns over the next five years and beyond.
Forget about cannabis and Bitcoin. Renewable energy is where the low-risk/high-reward opportunity is. You can make a prudent long-term choice today by putting your cash in renewable energy stocks today — a safe investment that’ll pay huge dividends over the next decade. And best of all, you won’t need to worry about your shares losing 90% of their value overnight.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.