The technology stocks, erstwhile stock market leaders, are besieged by extreme volatility lately and the ongoing trade disputes and the prospects of a slowdown in economic growth compound the uncertainty. Investors are now moving to safer grounds in search of environmental friendly and “greener” pastures.
Independent power producers with a portfolio of non-regulated renewable and clean energy power generation facilities are seen as worthy replacements (with better earning potentials) to tech stocks.
Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) and Brookfield Renewable Partners L.P. (TSX:BEP.UN)(NYSE:BEP) are suddenly in the limelight. Aside from being defensive stocks, the dividend yields are among the highest. Thus, both are must-buys in uneasy times.
Go clean and green
Algonquin Power & Utilities Corp. is a mighty name in the renewable energy sector. Generous passive income awaits prospective investors. About 75% of company earnings are derived from regulated utilities and 25% come from renewable power under long-term contracts.
Algonquin owns massive renewable power assets in Canada and the U.S. At present, the combined generating capacity of their own and operate hydroelectric, wind, solar, and thermal facilities is approximately 1.5 gigawatts and growing.
The dividend yield of 4.47% is very appetizing, and with more renewable energy projects in the pipeline, a 10% yearly increase is a strong possibility. The average net income for the last three years is $85 million.
While Algonquin’s market cap is only $7.8 billion, it can deliver better returns than large-cap stocks and beat small-cap stocks handily. Analysts find that company’s debt level as too high, but AQN’s earnings after interest and tax are three times its net interest payments. That’s the mark a financially sound company.
A bright and sunny future
Another green energy stock that’s getting so much attention these days is Brookfield Renewable Partners L.P. The company is regarded as one of the leaders in the renewable energy sector. It’s a blue chip, high-quality stock in terms of dividend yield. Who wouldn’t be charmed by a 6.5% dividend yield?
The business outlook is exceedingly bright for Brookfield, as several green energy power projects will soon deliver the goods. Shareholders will be delighted to know that the estimated earnings growth this year is 77%, but will taper off to about 47.8% in 2020. For this quarter, growth estimate is 1,500%.
Liquidity and cash flow snags will never be a problem; the company has never been financially stable as today. No financial obligation and other major liabilities stand in the way of growth. It’s all green light for growth in the next four years.
The stock market is really the best place on earth on to get rich. Tech stocks ruled for quite some time until this trade war came along. Fortunately, there are other sectors that will advance and take market leadership.
Investing in renewable energy is gaining ground. More and more funds are flowing into Algonquin Power and Brookfield Renewable. Finally, the pair is finally getting the recognition they deserve — and investors are being rewarded with immense and overly generous income.
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 Christopher Liew has no position in any of the stocks mentioned. Brookfield Renewable Energy Partners is a recommendation of Stock Advisor Canada.