1 Top Canadian Utility Stock to Beat the Coronavirus

Boost the defensive nature of your portfolio during these difficult times by adding Brookfield Renewable Partners L.P. (TSX:BEP.UN)(NYSE:BEP) to your investments.

| More on:
Volatile market, stock volatility

Image source: Getty Images

Even the coronavirus pandemic could do little to dampen the performance of Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP). The renewable electricity utility, which for some time failed to unlock value from its assets, has been delivering solid numbers since 2017. It is also proving resilient to the coronavirus pandemic. Brookfield Renewable’s strong defensive characteristics and the importance of electricity for powering modern economies and society.

Solid results despite the pandemic

Brookfield Renewable reported some solid first quarter 2020 results, including a 1% year-over-year increase in actual power generation, which was also 0.8% greater than the projected long-term average for the period.

Despite announcing a 58% year-over-year decrease in net income for the first quarter, Brookfield Renewable’s numbers were sound. The utility’s normalized funds from operations (FFO), a better measure of its financial performance, grew by 5.5%. Brookfield Renewable finished the quarter with over US$3 billion in liquidity with US$294 million being cash on its balance sheet.

Globally diversified assets

Like electricity utilities, Brookfield Renewable possesses a wide almost insurmountable moat, which, along with steep barriers to entry and considerable regulation protects its earnings. The certainty of the partnership is further enhanced by the inelastic demand for electricity.

Brookfield Renewable has built a high-quality contract portfolio for the sale of the electricity it produces with over 600 counterparties, further reducing the risks posed to its earnings. Notably, 95% of its revenue comes from contracted or regulated sources, further ensuring its stability, which is enhanced by the contracts having an average weighted contract life of 14 years.

Those characteristics will minimize the disruptive impact of the coronavirus pandemic on Brookfield Renewable’s earnings and financial position.

The diversification of Brookfield Renewable’s operations, which sees it operating in 27 energy markets in 17 countries, further protects its earnings. This also allows it to benefit from strong growth in emerging markets such as Colombia and Brazil as well as the earnings stability of its U.S. and Canadian assets.

Leading electric utility

The ongoing fight against climate change and clean energy targets will act as a powerful tailwind for Brookfield Renewable. That will be enhanced by the utility’s re-contracting initiative where it is seeking to lock-in higher prices for the electricity sold, boosting margins.

Those attributes allow Brookfield Renewable to reward investors with a steadily growing distribution. It has raised that payment for the last 10 years straight to be yielding a juicy 4.5%. Brookfield Renewable’s solid growth characteristics, liquid balance sheet and defensive attributes ensure the sustainability of the distribution. They also support the partnership’s plans to grow it by 5% to 9% annually.

Foolish takeaway

Brookfield Renewable remains a top investment with which to build long-term wealth. Over the last decade, the renewable energy utility has delivered a whopping 505% for a compound annual growth rate (CAGR) of 20% if the distributions were reinvested.

While past performance is no guarantee of further returns, this demonstrates the considerable gains ahead for investors.

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 Matt Smith has no position in any of the stocks mentioned.

More on Dividend Stocks

grow dividends
Dividend Stocks

3 Canadian Stocks With a Real Chance of Doubling Your TFSA’s Value

Three outperforming Canadian stocks can help TFSA investors double their account balances.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 No-Brainer Stocks I’d Buy Right Now Without Hesitation

At any given time, the market may have certain stocks that offer a powerful combination of reliability, potential, valuation, etc.,…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The Bank of Montreal (TSX:BMO) says that the average TFSA balance is $41,510, far below the maximum.

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Dividend Stocks

Investors: Here’s How to Make $1,000 Each Month in Retirement

Here's how you can easily make $1,000 in monthly passive income in retirement in Canada, without taking on too much…

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer TSX Stocks I’d Buy Right Now Without Hesitation

Three TSX stocks that continue to overcome massive headwinds and beat the market are no-brainer buys right now.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 2 Top TSX Dividend Stocks to Buy on a Dip and Hold Forever

These top TSX dividend stocks now offer attractive yields and big potential capital gains.

Read more »

grow money, wealth build
Dividend Stocks

1 Dividend Stock to Buy for Growth and Stay for a 5.5% Yield

This dividend stock has been rising higher, but more could certainly be on the way. Now is the time to…

Read more »