Brookfield Renewable is built around a low-risk strategy
The Motley Fool’s Take
If you’re looking for stock price appreciation over time as well as dividend growth, consider Brookfield Renewable Corp., a go-to company in the energy sector.
Brookfield has built its foundation around a low-risk business model focused on generating stable cash flow. It has a globally diversified renewable energy portfolio consisting of hydroelectric, wind and solar facilities. It sells electricity to end-users such as power utilities under long-term fixed rate power purchase agreements, enabling it to generate stable cash flow to support its large dividend. .
It also has a long history of value-added acquisitions and completing high-yield development projects, and it expects this to continue, believing that future M&A activity could add up to 9% to its net income each year. The deals could include the acquisition of operating renewable energy assets, development projects and companies that need to decarbonize their operations.
Brookfield has a huge long-term advantage, driven by growth drivers such as inflation-linked contractual rate increases, rising renewable energy prices, cost-cutting initiatives and its development pipeline.
Brookfield recently posted a dividend yield of 3%, more than double the S&P 500’s recent 1.3% return. The company plans to increase its payout by 5-9% annually. (The Motley Fool owns shares and recommended Brookfield Renewable.)
ask the fool
From LD in Honolulu: Given that so many stocks are down now, does it make sense to sell some of the riskier ones and shift that money into safer stocks that are also down?
The madman responds: Think of it this way: Which stocks inspire the most confidence that they will do just fine in the long run? What actions are your best and most promising ideas? This is where most of your money should be – ideally split between 25 or more large companies.
From AS to Lexington, Ky.: What percentage of my wallet should be in cash?
The madman responds: There is no best answer for everyone. Remember that the stock market will experience occasional corrections and crashes every few years or so, so you shouldn’t invest the money you’ll need for the next five years (if not 10, to be more careful).
First, make sure you have an accessible emergency fund with at least three to nine months of living expenses. Beyond that, keeping some of your portfolio in cash or short-term investments such as CDs, short-term bonds, or money market accounts means you can access funds without having to sell cash. stocks when they are down. Having money in the face of a market downturn also means you’ll be able to buy stocks of big companies when their prices have fallen.
Consider keeping up to around 5%, or even 10%, of your portfolio in cash or short-term investments – increasing it once you approach retirement or are retired, until at least minus one or two years of living expenses. Don’t go for the money then, because retirements can last for decades and you may want a large portion of your portfolio to continue growing for you.
school of fools
Most of us could use a little (or a lot) of advice from a good financial advisor. But finance professionals vary not only in their skills, but also in how much you can trust them.
It can help if the professional you are dealing with is bound by an ethical requirement. Physicians, for example, take the Hippocratic oath to prevent disease wherever possible and to respect patient privacy, among other things. There is also a “fiduciary” duty that applies to many professionals, such as lawyers and real estate agents. This obliges them to act in the best interests of their clients.
Many, but not all, finance professionals are also bound by a fiduciary duty – and it’s worth sticking to just those people. All Registered Investment Advisors and Certified Financial Planners have a fiduciary duty when providing financial advice. They will need to act in your best interests and may also have other requirements, such as disclosing any conflicts of interest.
If your financial adviser is not a fiduciary, they may simply meet a “suitability” standard, which means they can recommend any investment or action that is right for you. When there are several suitable options, he will not necessarily recommend the best one, especially if he has a conflict of interest, such as receiving a sales commission on one of the options.
Being invested in investments that are not suitable for you can mean that you pay higher fees than necessary, which can cost several thousand dollars over many years. Alternatively, an appropriate investment could be much riskier than an investment that is in your best interest.
Some finance professionals have a fiduciary duty for some activities, but not all. When dealing with a professional, it is best to ask them if they are bound by a fiduciary duty for the services they provide to you, such as investment advice or tax planning.
You can also look for advisors designated as “pay-only,” who charge fees for their services but don’t earn commissions from the sale of your products. You can find them on napfa.org.
My dumbest investment
From Solomon, online: My dumbest investment move was buying 300 shares of Shopify circa 2016 at $37 per share and then selling after the stock tripled. I split the proceeds three ways – between AT&T and Exxon Mobil stock and paying off a truck loan. Now I’m sitting on my porch in a rocking chair, drinking beer and still thinking about those investment moves.
More recently, I bought shares of a company at $18 and I never, ever, ever sell. Although it’s doubled, and I need a new riding mower.
The madman responds: It’s not necessarily such a stupid investment. You have tripled your money, after all.
But you’re right to point out that if you had stuck with it, you could have earned a lot more in Shopify. You sold around $111 per share – then Shopify hit a high of $1,700 per share in November 2021. Note, however, that its shares have fallen sharply along with many other growth stocks: it recently fell nearly 63% from this high level. , at $657 per share.
AT&T and Exxon Mobil aren’t expected to grow like gangbusters, but each recently posted dividend yields above 4%. In the meantime, it’s good to aim to never sell your new stake, but keep an eye on it, in case its future starts to look less rosy. You might even consider Shopify again, if you expect continued growth from it.
Who am I?
My roots go back to 1971, when my founder bought a pretzel business at auction for $72,100. I then had eight employees and $400,000 in annual sales. Based in New Jersey, I employ approximately 4,200 people and make over $1 billion a year. You may know some of my brands: SUPERPRETZEL, ICEE, Luigi’s Italian Ice, The Funnel Cake Factory Funnel Cakes and Tio Pepe’s Churros. I am also licensed to sell Minute Maid frozen juice products and Aunt Anne’s frozen pretzels. I’ve been named one of America’s Best Small Businesses multiple times. Who am I?
Don’t remember last week’s question? Find it here.
Answer to last week’s quiz: IGT