All three major indexes in the United States enjoyed a big bounce back on Monday, November 26. Unfortunately, the energy-heavy TSX only gained 1 point on the same day. Collapsing oil and gas prices have exacted a heavy toll on Canadian energy stocks. There is hope for some respite ahead of a major OPEC meeting in December, but Canadian officials have made it clear that the Alberta oil patch is in crisis mode right now.
Last week I’d discussed the promising trajectory of renewable energy investment across the globe. This current price crisis for oil and gas has many energy investors thinking back to the 2014-2015 price shock. The collapse in oil prices plunged many of the top companies into debt from which they’re climbing out of.
Instead of betting on a rebound in the oil and gas sector, investors should look to renewable energy stocks in the last weeks of 2018. Total worldwide energy usage will grow by nearly 40% over the next 20 years, and renewables are stepping in to fill this demand. A report from Bloomberg New Energy Finance forecast that the renewable energy sector will receive $5 trillion worth of investment in new power plants by 2030.
These are all great reasons to jump into this sector. Let’s look at two stocks that are well-positioned to benefit from the transition.
Brookfield Renewable Partners (TSX: BEP.UN)(NYSE: BEP)
Brookfield Renewable owns a portfolio of renewable power generating facilities in Europe, North America, and Latin America. Shares of the company have climbed 1.1% over the past month as of close on November 26. The stock is still down 13.7% in 2018 so far.
Brookfield posted a strong third quarter on October 31. Funds from operations (FFO) rose to $105 million or $0.33 per share compared to $91 million or $0.28 per unit in the prior year. The company announced that it would pursue $1 billion in asset sales by the end of the year. This is expected to increase liquidity to $2.3 billion which should fuel investment going forward.
The board of directors declared a quarterly dividend of $0.49 per share, representing an attractive 6.6% yield. Investors may have missed the bigger bargain in late October and early November, but the stock remains enticing especially considering the added income.
TransAlta Renewables (TSX: RNW)
TransAlta Renewables is a Calgary-based utility company. Shares of TransAlta have dropped 18% in 2018 as of close on November 26. The company posted its third-quarter results on November 1.
On October 15, TransAlta announced that Microsoft would be the counterparty to a 15-year purchase arrangement for the 90 MW Big Level wind facility under construction in Pennsylvania. Commercial operation is expected to launch in the middle of 2019.
Renewable energy production has experienced a marginal increase from the first nine months of 2018, while revenue is down to $322 million compared to $325 million in the prior year. On October 31, TransAlta declared a monthly dividend of $0.07833 per share, representing a monster 8.5% yield.
TransAlta stock is currently hovering around a 52-week low and is an attractive pick up for investors on the hunt for income and potential long-term growth before this year comes to an end.
