The number of well-intentioned investors supporting companies contributing to an eco-friendly future is growing. This group anchors its investment decision not only on financial factors but also on the positive environmental impacts of the companies.
Brookfield Renewable Partners (TSX: BEP.UN) and GFL Environmental (TSX: GFL) are the top environmental stocks to buy on the TSX today. The former’s diversified portfolio and platform focuses on renewable power and decarbonization solutions. However, the latter offers environmental and industrial services, specifically solid and liquid waste management.
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Long growth runway
Brookfield Renewable aims to be the clean energy and decarbonization partner of choice for leading corporations. The $20 billion will leverage its existing capabilities and development pipeline to capture the growing demand for renewable energy. Its chief executive officer (CEO), Connor Teskey, said, “The prospects for our business are as strong as ever.”
The large-cap stock trades at a discount ($30.26 per share), but the 6.13% dividend compensates for the temporary weakness (-8.45% year to date). Brookfield Renewable isn’t immune to market headwinds, although it can execute its strategic priorities, achieve growth targets, and deliver robust long-term returns.
In the third quarter (Q3) of 2023, funds from operations (FFO) increased 7% year over year to US$253 million, while net loss narrowed 52.9% to US$64 million versus US$136 million in Q3 2022. According to Teskey, it was another successful quarter because Brookfield Renewable utilized its disciplined approach to growth and delivered strong operating results.
Brookfield Renewables takes pride in having the only scale multi-technology global clean energy businesses worldwide. It can offer 24/7 clean power solutions and expects to benefit greatly from the nearly 150,000 megawatts development pipeline. The largest procurers and end users of clean energy globally can rely on the company.
The merger & acquisition (M&A) activities are likewise ongoing. Brookfield Renewable recently acquired Elio and Deriva Energy and is due to close the deals for Westinghouse and Origin Energy next. More importantly, access to capital is not a concern, despite the market volatility.
Brookfield Renewable had $4.4 billion of available liquidity as of Sept. 30, 2023. Management secured over $10 billion of non-recourse financing and will raise $8 billion more by year-end. The current financial position provides significant flexibility to fund growth.
Long-term sustainable shareholder value
Vaughan, Ontario-based GFL Environmental is North America’s fourth-largest diversified environmental services company. Through its platform, the $14.7 billion waste removal firm provides solid waste management, liquid waste management, and soil remediation services.
In Q3 2023, revenue increased 14% year over year to $5.63 billion, while net income reached $94.3 million versus the $92 million net loss in Q3 2022. Solid waste and environmental services’ revenue growth was 6.8% and 12.9%, respectively. Management credits significant margin improvement and higher core pricing for the top-line growth.
GFL’s founder and CEO, Patrick Dovigi, said, “We continue to manage our asset base to create long-term sustainable shareholder value … Our strong results year to date position us well for outsized operating leverage next year. Our preliminary 2024 outlook sets us up to achieve high single-digit top-line growth.”
Clean and green
Many investors are turning to clean and green investments by adding environmental stocks to their portfolios. Brookfield Renewable Partners and GFL Environmental are excellent long-term plays.
