Building a dividend portfolio can be tough. But building a dividend portfolio that is socially responsible can be even more challenging. Luckily, there are some sectors that have plenty of green options. Utilities, traditionally some of the steadiest dividend growers there are, have a number of renewable energy-focused alternatives that you can consider taking a position in to add some cash to your pocket.
You will notice that some of these companies produce power from natural gas. While this energy source is technically a fossil fuel, it is considered a bridge energy source to renewable energy. This is due to the fact that natural gas burns much cleaner compared to other energy sources such as oil and coal.
TransAlta Renewables (TSX:RNW)
Spun off from the coal-powered TransAlta earlier in the decade, TransAlta Renewables are the cleaner sibling. It has also proven to be the more successful of the two. The company operates wind, hydro, and gas energy projects. The majority of its revenues come from the gas and wind segments of the business.
TransAlta Renewables has a hefty monthly dividend of almost 8% at the current stock price. This dividend has been consistently raised since the unit was spun off from TransAlta. This includes a 7% dividend increase last September.
Algonquin is the largest of the three companies by market capitalization. It is also dual listed on the Toronto and New York stock exchanges, which provides more liquidity for the shares as it more accessible for American investors. Algonquin produces power by using wind, solar, natural gas, and thermal power sources. It also has a water and wastewater distribution business. Since it has much of its operations in the United States, the company pays a 5% dividend in U.S. dollars. This dividend has grown steadily over the years, including the most recent hike of 10%.
Northland Power (TSX:NPI)
This power-generation company has been around since 1987 and was one of Canada’s first independent power producers. It produces energy from wind, solar, natural gas, and biomass sources. The company operates primarily in Canada and Europe, giving investors a touch of diversification. Northland Power’s share price has recently pulled back after a nice run, so it is now sporting a dividend of around 5.5%.
Add some green to your portfolio today
Before you buy, keep in mind that these are utility companies that generally have a lot of debt. However, even though they use a lot of leverage, these companies also have steady, often regulated cash flows and debt issuances with maturities staggered over several years. As such, the utilities are able to manage their debt levels quite effectively.
The prices of most of these companies have come down quite significantly in recent weeks. Their dividends are becoming extremely attractive for income-focused investors. Owning these companies over the long term will provide you with a steady stream of cash. At the same time, those companies will also provide you with a steady stream of positive emotions, knowing that you are helping to make your planet a little bit brighter.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Kris Knutson owns shares of ALGONQUIN POWER AND UTILITIES CORP.