COVID-19 has been a serious boon for TSX technology stocks. The new “stay-at-home economy” has seen stocks like Shopify, Docebo, and Enghouse explode higher this year. Yet there is another, perhaps less exciting sector that is experiencing COVID-19 tailwinds, and many investors may not even realize it. The sector I am talking about is the renewable energy sector.
Utility-like security, technology-like growth
While many renewable stocks have somewhat boring utility-like qualities, many also have serious growth potential. The World Economic Forum recently noted that the COVID-19 pandemic has rapidly accelerated renewable power demand. In fact, in only seven weeks, demand for renewable power in the U.S. increased by more than 30%.
While many investors may not realize it, renewable power is quickly becoming one of the cheapest (and safest) sources of power across the globe. As humanity seeks to protect the planet from global warming, demand for clean, green power solutions will continue to expand.
As a result, I believe we are still in the early innings of growth for this industry. Here are two top TSX renewable stocks that have major growth pipelines and can seriously multiply your wealth over time.
This top TSX stock is a master of wind power
The first TSX renewable stock is Northland Power (TSX:NPI). Northland is a global developer and operator of renewable energy assets, particularly offshore wind assets. It derives 66% of its adjusted EBITDA from wind farms, 8% from a Colombia utility, and 26% from natural gas/biomass and solar operations.
Northland is a top TSX renewable stock for a few reasons. Firstly, it has a diverse portfolio of very attractive assets. Its recent Colombia utility acquisition provides a consistent regulated cash stream that balances out the intermittency of offshore wind power.
Secondly, the company has a large growth pipeline. It has 130 MW solar project in Mexico, 2.6 GW of offshore development opportunities in Asia, and it recently added a potential development opportunity on the west coast of British Colombia.
Over the past five years, Northland has delivered an annual total shareholder return of 19%. That is pretty impressive for a power company. In reality, Northland more like a TSX growth stock. While it pays a steady 3.7% dividend, I am most excited by its growing development pipeline and its capacity to compound cash flow growth for many years to come.
This top TSX stock has scale and internal growth
The next top TSX renewable stock is Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP). It owns and operates over 19,000 MW of hydro, wind, and solar renewable power across four continents. 74% of its operations are hydro power, with the remainder being wind and solar.
This top TSX stock has a great opportunity to expand your wealth over a lifetime. Firstly, it has a very diversified platform across the globe. Not only does this provide production consistency, but it also provides BEP scale to expand globally. Presently, it has over 831 MW of development projects scheduled for completion in just the next two years.
Secondly, it has significant organic growth. Through inflation escalations, re-contracting, cost synergies, and internal development projects, management expects to drive annual FFO growth of between 6% to 11%. This should result in dividend growth of 5% to 9% a year.
Thirdly, BEP is spinning off a new corporation share class later this year. This is a great short-term catalyst that will further broaden BEP’s investor base and increase the liquidity of the stock.
Over the past five years, BEP has accreted 15% annualized total returns. Presently it pays a 4.5% dividend. When you combine its dividend and its growth potential, BEP is one top TSX stock that you can hold for a very long time and watch your wealth steadily multiply.
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 Robin Brown owns shares of Brookfield Renewable Partners and NORTHLAND POWER INC. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool recommends Enghouse Systems Ltd.