Canada is acknowledged globally as one of the leaders in renewable energy because of its substantial renewable sources. Besides fighting climate change, the federal government wants an affordable and secure cleaner energy system. Also, you can replenish energy from natural sources faster than its consumption.
Meanwhile, investors can ride on the wave of renewable energy stocks and leverage the robust growth in the space. They are also great options for diversification. Today, three names are well positioned to create long-term value and deliver healthy dividend returns.
Impact investor
Brookfield Renewable Partners (TSX: BEP.UN) invests in renewable power and climate transition assets. The $23.52 billion company owns and operates a clean energy portfolio (hydro, wind, solar), including distributed energy (storage) and sustainable solutions. Currently, it has over 8,000 power-generating facilities.
This impact investor is present in five continents, selling power to public power authorities, utilities, and large companies procuring green power. Brookfield’s assets in various renewable power and transition assets boast a strong contract profile. The long-term, inflation-indexed contracts generate stable cash flows.
Because of the multiple levers to grow cash flows, attractive selling prices, and increasing demand for renewable energy, Brookfield expects to deliver 12-15% total returns and 5-9% annual distribution growth. At 35.48 per share, current investors enjoy a 5.98% year-to-return on top of the 5.01% dividend yield.
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Grander scale is coming
TransAlta Renewables (TSX: RNW) is popular with dividend earners because of its enticing dividend yield (6.98%) and payout frequency (monthly). At $13.49 per share, an $8,606.62 investment (638 shares) will produce $50.06 monthly.
Calgary’s $3.6 billion utility firm owns wind, solar, hydroelectric, gas, and energy storage facilities. TransAlta operates in three countries, including the United States and Australia. In Canada, It’s the largest generator of wind power.
TransAlta’s diversified platform, highly contracted renewable and natural gas power-generation facilities, and other infrastructure assets deliver stable, consistent returns. However, a large-scale clean electricity leader will emerge by the fourth quarter (Q4) of 2023 if mother company TransAlta Corporation completes the proposed business combination with RNW.
Growing installed capacity
Boralex (TSX: BLX) is underperforming in 2023 (-21.1% year to date), but it isn’t a deal buster. The $3.21 billion utility company has doubled its installed capacity to three gigawatts (GW) in the last five years and has increased to six GW in Q1 2023. But with several projects in the pipeline (early, mid, and advanced stages), a significant addition to the portfolio is imminent.
This Kingsey Fall-based firm has facilities in Canada, the United Kingdom, and the United States. In France, Boralex is the largest onshore wind power producer in France. Management said growth is firmly grounded in a long-term vision.
Also, the pipeline of fully contracted projects should deliver attractive, risk-adjusted returns on invested capital. Fixed-price and indexed energy sales contracts cover the installed capacity. Moreover, the weighted average remaining term of the contracts is 11 years.
Expect Boralex to seize every business opportunity in the global energy transition. If you invest today ($31.29 per share), the dividend yield is a decent 2.11%.
Less-volatile sector
Renewable energy stocks, notably Brookfield Renewable Partners, are no-brainer buys for growth and income investors. Since the clean energy sector is less reliant on economic conditions, the stocks have protection against market volatility.
