The ongoing energy transition with an increased focus on decarbonization through policy reforms and incentives will drive significant capital investments in the renewable power sector to boost capacity over the next decade. Thus, investors seeking long-term growth opportunities should focus on top renewable energy stocks to capitalize on the growing adoption of green energy and generate wealth.
While green energy stocks have the potential to deliver solid capital gains, they also offer reliable income. Notably, green energy companies benefit from the contracted asset base, which adds stability to their distributable cash flows, thus driving dividend payouts.
With this backdrop, I’ll discuss two top Canadian stocks from the green energy sector worth investing in for the long term.
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Brookfield Renewable Partners
Brookfield Renewable Partners (TSX: BEP.UN), being the pure-play renewable energy company, is a top stock in this space. It owns a globally diversified portfolio of high-quality renewable power assets (hydroelectric, wind, solar). Further, it has about 25,700 megawatts of installed capacity and a development pipeline of nearly 126,000 megawatts of renewable power assets, which makes it a top stock among the leading companies in the renewable energy space.
Brookfield Renewable Partners’s solid financial performance has driven its stock price higher. Also, it has allowed the company to enhance its shareholders’ return through higher dividend payments. Its stock has grown at a CAGR (compound annual growth rate) of over 20% in the last five years and delivered a return of nearly 150% during the same period. Furthermore, its dividend has grown at a CAGR of 6% in the past two decades.
Looking ahead, Brookfield Renewable Partners’s diversified and long-life assets, low operating costs, and long-term contractual arrangements with creditworthy counterparties will likely drive its financials and payouts. It’s worth highlighting that approximately 90% of the power output is contracted. Meanwhile, these contracts have a long weighted average remaining life, which adds stability to its financials. Also, these contracts have protection against inflation, allowing it to grow organically.
Impressively, its renewable power development pipeline of 126,000 megawatts and commissioning of new capacity with each passing year positions the company well to generate strong funds from operations over the next decade. The company is targeting to deliver 12-15% returns annually to its shareholders over the long term, which looks attractive.
Capital Power
Along with Brookfield Renewable Partners, investors could consider investing in the shares of Capital Power (TSX: CPX), a growth-oriented wholesale power producer. This independent power-generation company owns about 7,500 megawatts of renewable power-generation capacity at its 29 facilities in North America.
Capital Power’s low-risk business model and growing cash flows support its stock price. Capital Power stock has gained about 141% in the last five years, reflecting a CAGR of more than 19%. In addition, Capital Power shareholders also benefitted from the company’s higher dividend payouts.
Overall, Capital Power’s diversified renewable asset portfolio, long-term contractual arrangements, and a solid pipeline of developmental projects bode well for future growth. Further, the company expects to enhance its shareholders’ returns by increasing its annual dividend by 6% through 2025. Currently, Capital Power stock offers a lucrative yield of over 5%.
