One thing you need to keep at the top of your mind is the fact that this is likely to be a very deep, long-lasting recession. The government, households, and many companies simply don’t have the cash on hand to ride out a recession without seriously cutting back on spending. People had been warned for ages, but that doesn’t count for much, as we’ll soon see.
The good news is that if you have been responsible, you should have plenty of cash on hand to buy pretty much any asset you want. Deflation is terrible for those who have debt, but great for those who have cash.
In this article, I’m selectively focusing on quality companies whose earnings can go undergo a long, drawn-out recession with ease.
I have been suggesting selling utility companies, at least in small amounts, for some time now as they were very expensive. Now that the stock market crash has knocked down good and bad companies alike, utility companies are once again worth buying.
This is a great buy today
One company worth including is Brookfield Renewable Energy LP (TSX:BEP.UN)(NYSE:BEP). This is one of the best names in the renewable energy space. It is globally diversified, has excellent assets, and is in a long-term high-growth space of sustainable energy.
This company can give you excellent income and dividend growth for decades, making this blip a fantastic buying opportunity for income investors.
The company is located in multiple countries including India, China, Europe, and South America. While this may not be appealing for some in the short-term, global diversification allows the company to take advantage of growth both in Canada and abroad. Demand for power is certainly growing faster in developing nations, so this is a great way to benefit from future growth.
The company has over 19000 megawatts of generating capacity from wind, hydro, and solar power. It is for this reason that this is known as one of the best pure-play stocks in the renewable energy space. Most of their income comes in the form of long-term, inflation-linked contracts that guarantee earnings visibility for debt repayment and dividends.
The company, after the drastic downturn, has a yield in excess of 5%. This yield is forecast to grow by 5-8% annually, a growth rate that is underpinned by its steady income and cash flows.
This is the kind of company you want to own at this stage of the market — a company that produces high-demand products that can be used at any stage of the cycle.
The bottom line
The market can be a scary place, and right now is no exception. With things falling apart, now is not the time to be cute with your investment strategy.
Buy things with a long-term time horizon, as this recession could last a long time. This does not look like a short-term blip, so make sure you take a conservative approach with your investing capital.
For this reason, invest in things that can last the good times. Buying shares of a company like Brookfield Renewable is a great way to collect a great yield while investing for the long haul.
You will appreciate the income you gain from this company as you wait for the economy to turn around.
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Fool contributor Kris Knutson owns shares of Brookfield Renewable Partners.