Investing in renewable energy stocks is a wise financial move for several compelling reasons. Notably, concerns over climate change are leading to an accelerated shift towards clean energy. Most notably, the mounting concerns surrounding climate change are driving a rapid transition towards clean energy sources. This transition suggests that the renewable energy sector will attract substantial investments aimed at developing essential infrastructure, enhancing power generation capabilities, and meeting rising demand.
These investments are poised to yield considerable growth prospects for companies operating within the green energy sector, offering long-term investors a robust opportunity to generate substantial capital gains.
While investors can generate solid capital gains over time, they could benefit from the reliable dividend payouts of these companies. It’s worth noting that renewable energy companies gain from contractual arrangements that stabilize their cash flows and enable them to enhance shareholders’ returns through higher dividend distributions.
Given my long-term bullish outlook on the sector, let’s look at two Canadian stocks that can help capitalize on the energy transition opportunities and put you in the green. Further, these companies are dependable bets to generate solid dividend income.
Brookfield Renewable Partners
Brookfield Renewable Partners (TSX:BEP.UN) stands out as a leading Canadian stock for investors interested in the renewable energy sector. The company boasts an extensive portfolio of renewable energy assets, including wind, solar, and hydroelectric facilities. What sets this pure-play renewable energy corporation apart is its solid 25,900 megawatts of operational capacity and a remarkable 134,400 megawatts in its development pipeline.
Brookfield Renewable Partners’ solid asset base, long-term power purchase agreements, and low operating costs position it well to deliver reliable funds from operations (FFO) growth, which drives its stock price and dividend distributions. For instance, over the past 10 years, Brookfield Renewable Partners has achieved an impressive compound annual growth rate (CAGR) of 10% in FFO. At the same time, the company raised its dividend by a CAGR of 6%.
In the future, the company expects its FFO per share to grow at a CAGR of 10% through 2028. Further, its dividend is projected to increase by 5-9% annually. Overall, the renewable energy company expects to deliver 12-15% total returns per year, which makes it a compelling long-term bet.
Capital Power (TSX:CPX) is another reliable stock to bet on in the renewable energy sector. The independent power producer has 7,500 megawatts of operating capacity at its 29 facilities. Thanks to its diversified portfolio (including wind, solar, energy storage, and natural gas), Capital Power generates strong earnings, which drives its stock price and enables the company to bolster its shareholders’ returns via higher dividend payments.
Over the last five years, Capital Power stock has grown at a CAGR of close to 12% and delivered a total return of more than 75%. At the same time, Capital Power increased its dividend at a CAGR of 7%.
Capital Power remains committed to investing in renewable energy sources like wind and solar. Moreover, it plans to expand its energy storage and natural gas portfolio. These investments will likely enhance the company’s financial performance and contribute to the overall value delivered to the shareholders.