With interest rates seemingly on the rise, many long-term investors are beginning to grow wary of investing in utilities stocks, or any securities that resemble those of bonds. In the search for growth, many times investors can lose sight of the great long-term upside compounded dividend growth can have for a portfolio.
An attractive sector of late has been renewable energy issues due to the investment thesis that as the world begins to shift away from fossil fuels, renewable energy companies will be highly sought after.
The ones that can produce excellent long-term results, following this logic, should produce solid capital gains along with defined and predictable revenue streams over a period of time.
One of the companies I have been following of late in this space is Brookfield Renewable Energy Partners LP (TSX:BEP.UN)(NYSE:BEP). This company invests in large-scale renewable energy projects around the world, with a focus on generating hydroelectricity.
The company’s $25-billion portfolio of existing projects carries with it a generating capacity of 10,700 megawatts – and the portfolio continues to grow with a solid stream of acquisitions supported by the company’s strong balance sheet.
Looking at a pure-play renewables company is one thing, however what concerns investors the most about this industry is typically lower margins compared with firms in the more conventional energy sectors (i.e. oil & gas).
What Brookfield boasts is a portfolio of long-term power generation contracts with inflation-based increases over time, giving investors a stream of inflation-neutral revenues supporting a solid dividend of nearly 6% at today’s levels.
