Renewable energy stocks are among the hottest items in markets today. With ample government backing, high revenue growth rates and an air of social responsibility, they have a lot going for them. That’s not to say that every renewable energy stock will be a confirmed winner. As we saw with Algonquin Power & Utilities, sometimes companies in the renewable space can swing misses. Still, the sector has a lot of good names that will continue doing well. In this article, I will explore one TSX stock that provides considerable exposure to renewable energy in a diversified package.
Brookfield
Brookfield (TSX:BN) is a diversified financial conglomerate and the part-owner of Brookfield Renewable Partners (TSX:BEPC). Brookfield Renewable Partners is an absolute giant in the world of renewable power. For proof of that, we can simply point to the fact that it recently signed the largest clean energy deal in history, which will see it supply Microsoft with 10.5 gigawatts of power. This deal was big news when it was announced, as it demonstrated that Brookfield Renewable Partners was one of the biggest players in renewable energy, capable of supplying the world’s largest companies.
Why not BEPC?
Given that Brookfield Renewable Partners is the company directly responsible for Brookfield’s renewables bets, you might wonder why I’m emphasizing Brookfield Corp instead. The reason has to do with portfolio strategy. In general, it’s good to have some diversification in your portfolio, and Brookfield Corp is much more diversified than BEPC. While Brookfield Renewable Partners is a pure play on renewable energy, Brookfield Corp gives you some renewables exposure while also having
- A fast-growing insurance business;
- A highly profitable asset management business; and
- A valuable real estate portfolio.
These are all very promising assets that aren’t necessarily closely correlated. So, when you buy BN you get a more diversified package than you do going “all in” on BEPC. If you want the maximum possible amount of renewable exposure in your portfolio, then, of course, BEPC is the one to go with. I personally prefer Brookfield Corp for the reasons outlined above.
Heavy investments in renewables
Brookfield’s investments in renewable energy are substantial. In addition to owning 60% of Brookfield Renewable Partners, Brookfield also manages renewable funds and holds renewable energy companies in its stock portfolio. For example, it owns 35.5 million shares in TransAlta, a renewable energy utility. These investments show that Brookfield’s bets on renewables go beyond just Brookfield Renewable Partners and its own renewable operations.
A recent earnings beat
A final fact worth mentioning about Brookfield is that its earnings performance has been strong. Its most recent earnings release narrowly beat analyst expectations, delivering the following metrics:
- $23.8 billion in revenue, down 0.81%
- $4.7 billion in operating income, up 13.6%
- $1.35 in distributable earnings per share, up 80%
The growth in distributable earnings was truly incredible, and the result was better than expected. Going by earnings performance, BN stock seems to have promise.
Foolish takeaway
Taking everything into account, Brookfield stock looks like a good way to get some renewable energy exposure in your portfolio. It owns 60% of Brookfield Renewable Partners, possibly the most important renewables company in the world, and it has plenty of other investments to make it a sensible diversified corporation. Overall, I’m happy to have this stock in my portfolio.
