On September 4, the Bank of Canada decided to hold the key overnight rate to 1.75%. There are specific sectors that could benefit from the Bank of Canada maintaining low-interest rates. Stocks belonging to the consumer staples, utilities, and healthcare sectors are stronger in a low-interest rate scenario. Lower interest rates are also catalysts for growth.
Big companies with strong balance sheets and stable cash flows would have access to cheaper debt financing. Businesses could afford to fund their operations while consumers could spend more.
Interestingly, dividend-paying stocks like Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) and Canadian Utilities (TSX:CU) are winners when interest rates are declining. You can add the shares to your portfolio for higher earnings.
Predictable cash flows
If you want sustainable passive income, you should be investing in a company with predictable cash flows. Brookfield Renewable, one of the world’s largest renewable energy companies, has long-term, fixed-rate power purchase agreements with clients in the utility sector.
From these contracts, there are predictable cash flows while at the same shielding Brookfield Renewables from volatile power prices. In return for the cash flows, the company gives back high dividends to investors. The stock’s yield is 5.67%.
Brookfield Renewable’s renewable power platform is globally diversified. As of August 2019, the platform consists of hydroelectric generating facilities (75%), wind farms (21%), utility-scale solar projects (4%) and energy storage.
The company continues to target opportunities. Brookfield Renewable’s strategy is to buy underperforming assets then improves its operations and cost structure so the company could turn it around.
Brookfield Renewable’s outlook is for the long term. The company’s goal is to grow cash flow per share at a 6% to 11% annual rate through at 2022, allowing the company to raise dividend at a clip of 5% to 9% annually.
Defensive stock
Canadian Utilities is a worthwhile and profitable investment, as it derives the bulk of its income from a stable regulated market. Likewise, investing in the company is safe because the stock belongs in a defensive sector.
With a recession looming, Canadian Utilities is your safety net. The stock usually performs better than the broader market during recession. When it comes to track record of consecutive dividend increases, Canadian Utilities has increased its dividend every year for the past 47 years.
With adjusted regulated earnings comprising 99% of total adjusted earnings, the company’s utility rate base gives the dividend stability. Looking at the historical returns, a $10,000 investment in Canadian Utilities 20 years ago would have a total return of 436.66%. With dividend reinvestment, it could swell to 609.8%.
Furthermore, you can kick off your retirement with Canadian Utilities’ 4.4% dividend yield. You could earn a sizeable amount from the compounding returns and have plenty of cash during your sunset years.
Great investments in every respect
Brookfield Renewable is a tremendous clean energy stock because the company has consistently grown its cash flows in the past so many years. You can expect the company to implement dividend increases regularly in the coming years.
Canadian Utilities is a great utility stock because its regulated business model can sustain business growth in both the domestic and international markets. The company’s diversified assets are your guarantees of long-term growth.
Hence, if you want to collect a growing income stream for years, you can purchase both stocks and be financially secure forever.
