Worried about oil peaks? View these 3 clean energy supplies

Does it make sense to invest in traditional stocks if there is a clear shift to the production of energy from clean sources such as wind and sun? The debate on this subject has raged for almost ten years now, especially after the shale revolution in the US

A recent insight into this subject came from & # 39; the world's largest oil company, Saudi Aramco (SE :), which ended its IPO last week and valued the company at $ 1.7 trillion. Global oil demand can peak within the next 20 years, according to an assessment in the company's prospectus.

In the offer document, Aramco used a prediction from industry consultant IHS Markit Ltd. which peaks the demand for oil around 2035. According to that assessment, demand growth for crude and other oil liquids will level off at that time. In a graph in the prospectus, the Saudi oil giant showed that global demand for oil fell between 2040 and 2045.

A second demand scenario in the prospectus assumes a faster transition from fossil fuels. In that case, oil demand is expected to peak at the end of 2020, only a few months away. Aramco acknowledged in the document that climate change policy "could reduce global demand for hydrocarbons and drive a shift to lower carbon intensity fossil fuels such as gas or alternative energy sources."

Such assessments of & # 39; the world's largest oil well is clearly a good reason to invest in companies at the forefront of the clean energy revolution. Here are our three favorite stocks from this industry segment that would do well to long-term investors to save their portfolios:

1. Brookfield Renewable Partners

Among the clean energy producers, we love Bermuda-based Brookfield Renewable Partners (NYSE 🙂 because of its dominant position in the field and its diversified asset base.

Recent statistics support the case for BEP. The International Energy Agency sees continued strong growth of renewable energy sources until 2022, with a forecast of a renewable electricity capacity of more than 920 GW – an increase of 43%.

Brookfield & # 39; s Diversity – it operates hydroelectric, wind, solar and biomass facilities in addition to other renewable energy activities – and depth, with 17,400 MW of capacity and 876 facilities in North America, South America, Europe and Asia, the company offers a wide range of services.

The partnership recently declared a quarterly quarterly cash distribution of $ 0.515 per unit, which is growing at a compound annual growth rate (CAGR) of approximately 6%. According to the company's latest earnings report, Brookfield Renewable Partners generated $ 590 million in operating funds (FFO) in the first nine months of 2019, representing a 25.5% annual jump.

Brookfield Renewable Partners Weekly Weekly Price Chart

For the future, BEP expects its FFO per unit to continue to rise with a CAGR above 10% until 2024, as it acquires more companies and adds more capacity to are clean energy. According to the latest report, Brookfield Renewable strives for sustainable distribution with increases aimed at an average of 5-9% per year.

Trading at $ 47.47 at the end of Friday after an increase of 83% this year, BEP shares have proven to be a good bet for its investors. But we still love the annual dividend of $ 2.06, with a 5.8% return, and the potential for future growth.

2. Nextera Energy

We love long-term utilities for a simple reason: they invest billions of dollars to build assets that generate solid income for their investors. As long as customers continue to pay their energy bills, the money keeps coming in.

In this space, we particularly love Nextera Energy (NYSE :), the Florida-based utility that has been scaled up by providing clean energy, which is hard to beat for competitors. Nextera is the largest American supplier of renewable energy, which generates electricity from wind and sun. It also has a large pipeline company and a growing energy storage operation.

The big difference between Nextera and other traditional utilities is that it was not funded by a massive injection of debts. Instead, the company cleverly used the government grants and tax breaks that are offered to clean power generators. It usually sells the output to utility companies, many of which have to get electricity from green sources to meet state mandates.

The utility plans to invest $ 40 billion in its development projects by the end of next year. This should stimulate growth, especially at a time when the opportunities in the renewable market are huge and the company has already impressively scaled up. According to the Energy Information Administration, wind and solar energy was according to the Energy Information Administration in 2017 half of the energy generation capacity added in 2010.

Nextera weekly price chart

Nextera expands beyond its traditional utility customers to build wind farms and solar parks directly for large companies, such as Google's mother Alphabet (NASDAQ :), some of which want to use green energy facilities for financial and public relations purposes, the Wall Street Journal reported in June.

This mix of clean energy and energy storage companies has nicely rewarded investors. Shares closed at $ 234.39 on Friday, following their jump of 127% in the past five years. With a dividend yield of 2.13%, NextEra pays an annual dividend of $ 5 per share. The company plans to increase this by 12% to 14% until the end of 2020.

3. Duke Energy

Duke Energy (1945) is another attractive option like you are planning to expand your portfolio with a reliable supply of utilities that is expanding its clean energy activities. After a major restructuring of its assets in recent years, the utility company sold its carbon-based assets and foreign operations, purchased a utility and expanded its reach in renewable energy.

Owning Duke shares makes sense for long-term investors because the company's regulated business models make the cash flows predictable, meaning there is little risk of a negative. Duke has a $ 37 billion development plan that runs until 2022 to support the company's inflation-devouring dividend growth.

Duke Energy Weekly Price Chart

Through his diversified energy, gas and storage activities, Duke plans to achieve annual dividend growth of between 4% and 6%. The stock closed Friday's session at $ 89.76 after falling around 8% from the highest five-year level at the beginning of October, offering a good starting point for investors who will achieve more returns, now 4.2% from the annual dividend of $ 3.78.

Bottom Line

In our opinion, investing in clean energy stocks is a safe bet if you choose the right stock with the intention of continuing to invest. As the shift from traditional energy sources continues, these companies will become more known in the energy mix and become acquisition targets for established oil giants looking for more relevance in the rapidly changing environment.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.