Investors concerned about the global economy are no doubt already looking into recession-proofing their portfolios at the moment. However, one key area of both defensiveness and steep capital gains is the green energy sector. Here are a few reasons why Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) is such a strong addition to a portfolio right now.
Green energy is an international megatrend
Why are renewables a good play right now? For one thing, the sheer amount of capital that will end up getting pumped into green energy solutions over the next decade will likely be vast – indeed, it will have to be in order to meet and replace the fossil fuel network that’s currently the norm.
Gradual growth since the start of the month makes Brookfield one of the better dividend-dishing renewables on the TSX, which, despite its popularity, still has a tasty 4.85% yield on offer. The Brookfield family of stocks is suitably high-quality, representing a canny business model that involves buying quality assets and developing them using its trademark expertise, and its renewables offering is no different.
The market is cottoning on to the fact that Brookfield represents the best the green energy sector has to offer, with a spread of expertly managed assets collated and run by world-class asset managers to generate defensive and diversified passive income. From hydroelectric to wind and solar energy operations across the Americas, Europe, and beyond, Brookfield has a stable international footprint.
The time to prepare is now
The warning signs of recession are gathering: a downturn in U.S. job creation, spreading economic contraction across industries and continents, fiscal stimulation already underway at central banks around the world… and all of this ahead of Brexit, the Canadian federal election, and now a possible impeachment process in the U.S. Plus even the most bullish analysts expect no more than postponement in the upcoming China tariff talks.
Take Sweden for instance. Investors in Canada might not be paying too much attention to the ancestral home of ABBA right now, but perhaps they should. Sweden is considered an indicator nation for the rest of the E.U., with its liberalized, open market economy, and its manufacturing data has recently dived to 2008 levels.
With manufacturing weakness in Germany and Sweden, and facing an unruly Brexit, the E.U. could be staring down the barrel of a widespread recession. Given that Sweden’s economy is strongly tied to the global manufacturing cycle, one could say that the Scandinavian nation is a bellwether not only for Europe but for the global economy in general. A top answer for Canadians investors? Energy investment with a farsighted, broad-horizon approach.
The bottom line
Combined with the political and economic uncertainty in the U.S., the global outlook is clouding over. That’s why now is the time to start getting into defensive stocks – but critically, ones that also provide growth. Renewables tick all the right boxes, and with Brookfield’s world-class asset management expertise and diversified areas of business, it’s a solid play for longevity, capital appreciation, and passive 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 Victoria Hetherington has no position in any of the stocks mentioned. Brookfield Renewable Partners is a recommendation of Stock Advisor.