The growing focus on decarbonization globally and favorable policies, including subsidies, have driven the demand and adoption of renewable energy. Thanks to the ongoing transition towards sustainable energy sources, solid demand, and massive capital investments to boost capacity expansion, renewable energy stocks are poised to deliver attractive capital gains in the long term.
Besides capital gains, renewable energy companies are known for their solid dividend payouts. Notably, the businesses of these companies are backed by long-term power-purchase agreements and contracts that help generate predictable cash flows and support dividend payments. So, for investors planning to capitalize on the energy transition opportunities, here are three Canadian stocks worth investing in.
Brookfield Renewable Partners
The pure-play renewable energy company Brookfield Renewable Partners (TSX:BEP.UN) is a must-have stock for income and growth. It owns a diversified portfolio of renewable power assets (wind, solar, and hydroelectric) with over 25,700 MW (megawatts) of operating capacity and 126,000 MW of the development pipeline.
The company generates resilient cash flows and consistently enhances its shareholders’ returns through higher dividend payouts on the back of its diversified and long-life assets. Furthermore, low operating costs and long-term contractual arrangements with creditworthy counterparties position it well to deliver steady growth.
It’s worth highlighting that Brookfield Renewable’s about 90% of the power output is contracted with a weighted average remaining life of 14 years. Further, these contracts have protection against inflation, allowing visibility and stability to its future cash flows. While Brookfield is likely to benefit from higher demand, it plans to deliver 12-15% return per annum in the long term, which is attractive.
Capital Power
Next are the shares of the North American power producer Capital Power (TSX:CPX). It owns, acquires, and develops renewable and thermal power-generation facilities and has approximately 7,500 MW of power-generation capacity at its 29 facilities.
Thanks to its low-risk utility business, diversified renewable asset portfolio, and long-term contracts, Capital Power has enhanced its shareholders’ returns through higher dividend payments. The company increased its dividend for nine consecutive years. Moreover, it expects to grow its future dividend by 6% annually through 2025.
Overall, Capital Power’s low-risk business model, diversified renewable assets, and a robust pipeline of developmental projects position it well to deliver solid returns.
Northland Power
The final stock on this list is of Northland Power (TSX:NPI). This clean energy company has an economic interest in about three GW (gigawatts) of operating capacity. The company focuses on enhancing its shareholders’ returns through its growing asset base, strategic acquisitions, and high-quality projects supported by long-term revenue contracts.
Northland Power’s majority of revenues are under long-term contracts with creditworthy governments as counterparties. Meanwhile, the company is poised to gain from access to multiple markets and 20 GW of development pipeline. Furthermore, Northland Power’s strong capital investments, geographic expansion, and accretive acquisitions are likely to bolster its growth.
Thanks to its high-quality asset base and solid future growth opportunities, Northland Power could continue to deliver steady capital gains and reliable dividend payouts.
