Investors who want to focus on sustainable investing should consider buying shares of renewable infrastructure companies. The global shift towards clean energy solutions is inevitable, making renewable energy stocks solid long-term bets.
For instance, a report from the International Energy Agency states the clean energy sector would attract investments of approximately US$4 trillion for the world in the next seven years to help the world reach net zero emissions by the end of 2050.
We’ll look at two Canadian renewable infrastructure stocks you can consider buying this summer. Let’s see why.
Brookfield Renewable stock
One of the largest clean energy companies in the world, Brookfield Renewable (TSX:BEP.UN) owns cash-generating assets across verticals such as hydro, wind, and solar. It sells electricity to utilities, public power companies, and businesses, making it a recession-resistant entity. These power-purchase agreements are backed by long-term contracts, which are linked to inflation.
As electricity demand is quite steady across market cycles, Brookfield Renewable generates predictable cash flows and pays investors a healthy dividend yield of almost 5%.
Earlier this year, the company announced a distribution of $1.35 per unit, an increase of 5.5% year over year. In fact, it has increased dividends by at least 5% in the last 12 years.
BEP stock has already created massive wealth for long-term shareholders. An investment of $1,000 in BEP stock back in June 2013 would be worth $3,768 today, easily outpacing the broader indices.
The renewable giant continues to expand its base of assets, which should result in higher cash flows and dividends in the future. It will invest US$12 billion in capital expenditures in the next five years, allowing it to gain traction in transitional investments such as battery storage and nuclear energy.
Brookfield Renewable has a pipeline to develop clean energy projects, which will expand its clean energy portfolio by 110 gigawatts. Just to put this number in perspective, BEP can power 100% of the homes in Canada with its current development pipeline.
Innergex Renewable stock
Another Canada-based giant, Innergex Renewable (TSX:INE), is an independent renewable power producer. It acquires, owns, and operates hydro, wind, energy storage, and solar facilities. With an installed capacity of 4,184 megawatts, Innergex has a portfolio of 40 hydro facilities, 35 wind facilities, and eight solar farms.
Innergex has a portfolio of high-quality, long-life assets located on three continents, allowing the company to offer an attractive risk-reward profile to shareholders.
In the first quarter of 2023, it reported revenue of $218.3 million, up from $207.7 million in the prior-year quarter. Its top-line growth was supported by the acquisition of three solar facilities in Ontario, which is Canada’s largest province in terms of population. These facilities will also add 60 megawatts of installed capacity to Innergex’s existing portfolio.
The company’s operating cash flows were up 37% year over year at $400 million. But as Innergex continues to reinvest in growth and capital expenditures, free cash flow fell by 15% to $135 million in the March quarter.
Innergex stock is down 59% from all-time highs, increasing its forward yield to 5.4%. INE stock is currently priced at a discount of 30% to consensus price target estimates.