Forget About Oil: 2 Green Energy Stocks Yielding Up to 8.5%

Oil and gas prices are taking a big hit in late 2018. Fortunately, investors can pivot to stocks like TransAlta Renewables Inc. (TSX:RNW).

| More on:
You Should Know This

Image source: Getty Images

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.

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.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of Microsoft. Bookfield Renewable Partners is a recommendation of Dividend Investor Canada.

More on Investing

Arrowings ascending on a chalkboard
Tech Stocks

Why I Think Nuvei Stock Has Market-Beating Potential

Given its growth initiatives, expanding addressable market, and attractive valuation, I believe Nuvei has the potential to outperform the broader…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Need Passive Income? Turn $5,000 Into $23.85 Every Month

If you're looking for passive income that comes in like a paycheque, this dividend stock provides that to you along…

Read more »

A worker drinks out of a mug in an office.
Metals and Mining Stocks

5 Things to Know About Nutrien Stock in December 2022

Trading at heavily depressed multiples, Nutrien stock is a great opportunity, as it delivers solid financial results and an optimistic…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Shopify Stock Rose 15% in November: Is it a Buy Today?

Shopify (TSX:SHOP) stock rallied 15% this month but is still down 69% year to date, so should investors worry that…

Read more »

Man holding magnifying glass over a document

The 3 Most Oversold TSX Stocks to Watch Before 2023

Many oversold stocks are merely victims of market circumstances and potentially profitable bargains when they seem downtrodden.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

A TFSA Contribution Room of $88,000 and 1 Dividend Aristocrat Can Make You $172,330 Richer

A high-yield Dividend Aristocrat in the energy sector is a suitable holding for Canadians with $88,000 available contribution rooms in…

Read more »

Upwards momentum

Year-End Sales Tracker: 3 Growth Stocks Going for Value Prices

Growth stocks like Aritzia (TSX:ATZ) are on discount.

Read more »

Dollar symbol and Canadian flag on keyboard

2 Canadian Stocks I’ll Be Buying Hand Over Fist in 2023

Alimentation Couche-Tard (TSX:ATD) and another top growth stock could increase dividends in 2023.

Read more »