For most investors, the mere mention of the energy sector invokes thoughts of the oil market. And while the segment does offer some superb investments, there are some equally compelling non-oil energy investments to consider.
Here’s a look at three stellar non-oil energy investments for investors to load up on right now.
Source: Getty Images
This option can make your portfolio go nuclear
Just as the natural inclination is to associate oil stocks with the energy sector, its equally stereotypical to be dismissive of nuclear energy stocks, or more specifically, uranium miners such as Cameco (TSX:CCO).
Cameco is one of the largest uranium miners and suppliers on the planet. The uranium produced by Cameco is then used as fuel in nuclear reactors across the globe.
Few may realize this, but uranium is a traded commodity on the market, and Cameco sells that uranium to its customers through long-term supply contracts. This also provides a unique defensive opportunity for Cameco.
Specifically, when prices drop where mining becomes cost-prohibitive, Cameco can (and has in the past) suspend production operations and turn to fulfilling its contractual obligations through the open market.
The business model (apart from the open market buying) is not unlike the power-purchase agreements that utilities are known for. This means that the revenue produced from those uranium supply contracts is recurring and stable.
This enables Cameco to invest in further growth initiatives while strengthening its balance sheet.
Speaking of growth, demand for nuclear reactors continues to grow. There are an estimated 65 reactors under construction around the world and a further 95 planned.
For investors looking to diversify into non-oil energy investments, Cameco represents a unique growth opportunity right now.
Renewable energy on overdrive
Continuing with the theme of breaking the stereotype of non-oil energy investments, next up is Brookfield Renewable Energy (TSX:BEPC).
Brookfield is a well-known and respected name across multiple sectors. When it comes to the renewable energy arm, Brookfield is huge.
The company boasts a massive portfolio of facilities scattered across five continents. Those facilities generate a recurring and fairly defensive revenue stream.
More importantly, that revenue stream leaves room for Brookfield to invest in growth initiatives and pay out a very handsome quarterly dividend.
As of the time of writing, the yield on offer works out to 4.57%, meaning that a $30,000 investment will generate an income of nearly $1,400. For those investors not ready to draw on that income, that dividend can be reinvested to allow any future income to continue growing.
In other words, Brookfield Renewable is a top candidate for investors seeking out non-oil energy investments for their portfolio.
Power up your portfolio
The final option for investors looking at non-oil energy investments right now is Hydro One (TSX:H). Hydro One is one of the largest regulated electric utility stocks on the continent.
In Ontario, Hydro One is by far the largest transmitter and distributor of electricity. The pure-play nature of Hydro One’s business makes it a defensive pick, backed by a well-regulated business model.
Turning to income, Hydro One targets a payout ratio between 70-80%, which leaves room for both growth investments and dividend increases.
As of the time of writing, the yield on that dividend pays a respectable 2.72% yield.
Invest in non-oil energy investments
No stock, even the most defensive, is immune to market volatility. Fortunately, the trio of non-oil energy investments mentioned above can offer some defensive appeal in addition to long-term growth and income-earning opportunities.
In my opinion, a position in one or all should form part of a larger, well-diversified portfolio.
