Green energy stocks are poised to deliver massive returns over the next decade, reflecting solid investments in the sector to build capacity amid increasing demand. Favourable government policies and incentives to drive decarbonization and energy security provide compelling investment opportunities for investors. Thus, investors seeking solid long-term returns could add a few top-quality renewable energy stocks to capitalize on the energy transition opportunities and create wealth.
Besides stellar capital gains, investors will likely benefit from the solid dividend payouts of green energy stocks. It’s worth highlighting that green energy companies generate reliable cash flows driven by long-term contracts, which support their payouts and make them attractive passive-income stocks. Further, a reinvestment of these dividends will likely add to your capital and boost the overall returns in the long term.
Against this backdrop, I’ll discuss two top Canadian stocks from the green energy space with solid growth potential and reliable dividend payments.
Brookfield Renewable Partners
With an installed capacity of 31,600 megawatts and a robust development pipeline of approximately 131,900 megawatts, Brookfield Renewable Partners (TSX: BEP.UN) shares are a must-have in your long-term portfolio. The pure-play renewable energy company owns a highly diversified portfolio of hydroelectric, wind, and solar renewable power assets making it a top player in the green energy space.
Thanks to its high-quality assets and continued investments in new generation and commercial initiatives, Brookfield consistently delivers solid cash flows that drive its stock price and dividend payouts.
Its stock has grown at an average annualized growth rate of over 18% and delivered a return of more than 131% in five years. During the same period, it enhanced its shareholders’ returns through higher dividend payouts.
For instance, it raised its dividend at a CAGR (compound annual growth rate) of 6% for more than two decades. Furthermore, the company targets an annual dividend growth of 5-9% in the coming years.
Looking ahead, its diversified assets, long-term contracts (approximately 90% of the power generation is contracted), and long weighted average remaining life of these contracts position it well to deliver solid financials. Also, its contracts have protection against inflation, which is positive.
Brookfield Renewable Partners’s investments in power technologies and projects with compelling risk-adjusted returns will likely accelerate its growth rate. Moreover, the company could easily deliver its target returns of 12-15% annually to its shareholders over the long term.
Capital Power
Capital Power (TSX: CPX) is another top stock in the green energy space. This mid-cap company builds and operates high-quality, utility-scale power-generation facilities, including renewables and thermal. Further, this growth-oriented wholesale power producer owns about 7,500 megawatts of power generation across 29 facilities in North America.
Capital Power focuses on generating reliable and growing cash flows from its contracted power-generation portfolio. Thanks to its growing cash flows and low-risk business model, Capital Power has delivered a return of approximately 123% in five years.
Furthermore, Capital Power’s solid cash flows enabled it to enhance its shareholders’ returns through higher dividend payouts. CPX stock increased its dividend for nine consecutive years at a CAGR of 6%. Furthermore, it expects to grow its dividend by 6% annually through 2025.
Overall, Capital Power’s well-diversified renewable asset portfolio, robust pipeline of growth projects, and dividend growth make it a compelling long-term investment.
