The stock market rally has eased the pain of the coronavirus pandemic. Yet many investors remain wary. Will stocks sink again in the weeks to come?
Fortunately, there’s a way to play the market rally and mitigate your risk. These opportunities don’t come around often, and when they’re available, they usually don’t last for long.
If you want to invest for the long haul without assuming excess risk, take a close look at the following dividend stock.
Trust these dividends
Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) was built to deliver dividends over the long haul. In many ways, this business was designed to grow for another century. That’s a big reason why the market rally was pushed the stock higher. Yet despite the recent bump, shares still trade at a compelling valuation.
As its name suggests, Brookfield owns renewable energy assets. Its portfolio is valued at $50 billion, with 19,000 megawatts of installed capacity. It owns hydro, solar, wind, and battery-storage projects, which span 15 different countries.
Management claims that it has perfected a “consistent, proven, and repeatable strategy.” That strategy has produced double-digit annual gains for shareholders for more than a decade. But what exactly is the secret sauce?
There’s no denying that the world is going green. For energy, it’s not a shift predicated on regulations or earth-friendly wishes. Instead, it’s pure economics. Over the next five years, renewable energy investment is expected to total $5 trillion worldwide. That’s more than triple the rate of the previous five years. Now that’s a market rally!
It’s not hard to see why renewable energy projects continue to scale. In 2017, natural gas was cheaper, on average, than wind and solar. Today, wind is the cheapest form of new energy throughout the globe. By 2021, solar will also dip below cost parity.
The advent of clean energy will be one of the biggest opportunities in history, but it’s not without risk. That’s where Brookfield capitalizes. The company specializes in early-stage projects where the risk is higher, but the reward more than compensates. By targeting distressed and nascent renewable energy projects, Brookfield has made its shareholders wealthy.
Buy this market rally
Brookfield stock now trades at a 13% discount to its former highs. That may not seem like much, but it is. This stock rarely goes on sale. Every time it has, it’s been a major buying opportunity.
The best part of renewable energy is that it’s incredibly reliable. While there are day-to-day fluctuations, the wind and sun are remarkably consistent on an annual basis. And apart from maintenance costs, they’re free to harness. This creates reliable visibility into what the projects can produce. A short-term market rally or downturn have no impact on the energy production.
Additionally, Brookfield often contracts the power generation on long-term agreements. Its Spanish wind assets, for example, have 100% contracted cash flows. Deals like this allow the company to deliver a sizable dividend, which now stands at 4.6%.
If you want to buy the market rally but don’t want to bet the farm, Brookfield Renewable should be at the top of your buy list. It operates a risk-mitigated business with a long runway for growth. It also delivers a rock-solid dividend to keep you company.
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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 Ryan Vanzo has no position in any stocks mentioned.