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Motley Fool: An energetic stock

UPDATED: Fri., April 8, 2022

Brookfield Renewable Corp. owns a globally diversified renewable energy portfolio consisting of hydroelectric, wind energy and solar power-generating facilities.  (Associated Press)
Brookfield Renewable Corp. owns a globally diversified renewable energy portfolio consisting of hydroelectric, wind energy and solar power-generating facilities. (Associated Press)

If you’re looking for stock price appreciation over time along with dividend growth, consider Brookfield Renewable Corp. (NYSE: BEPC) – a compelling company in the energy industry.

Brookfield built its foundation around a low-risk business model focused on generating stable cash flow. It owns a globally diversified renewable energy portfolio consisting of hydroelectric, wind energy and solar power-generating facilities. It sells the electricity to end users like electric 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 making value-adding acquisitions and completing high-return development projects, and it expects that to continue, estimating that future merger and acquisition activities could add up to 9% to its bottom line each year. Deals could include acquiring operating renewable power assets, development projects and companies that need to decarbonize their operations.

Brookfield has enormous long-term upside, thanks to growth drivers such as inflation-linked contractual rate increases, rising renewable power prices, cost-saving initiatives and its development pipeline.

Brookfield recently sported a 3% dividend yield, more than double the S&P 500’s recent 1.3% yield. The company plans to increase its payout by between 5% and 9% annually. (The Motley Fool owns shares of and has recommended Brookfield Renewable.)

Ask the Fool

Q: Since so many stocks are down now, does it make sense to sell some of the riskier ones and move that money into safer stocks that are also down? – L.D., Honolulu

A: Think about it this way: Which stocks inspire the most confidence that they’ll do really well over the long run? Which stocks are your best, most promising ideas? That’s where most of your money should be – ideally spread across 25 or more great companies.

Q: What percent of my portfolio should be in cash? – A.S., Lexington, Kentucky

A: There’s no single best answer for everyone. Remember that the stock market will go through occasional corrections and crashes every few years or so, which is why you shouldn’t invest any money you’ll need in the next five (if not 10, to be more conservative) years.

First, be sure to have an accessible emergency fund with at least three to nine months’ worth of living expenses in it. 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 any shares when they’re down. Having cash in a market downturn also means you’ll be able to buy shares of great companies when their prices have fallen.

Consider keeping up to around 5%, or possibly 10%, of your portfolio in cash or short-term investments – increasing it once you’re near or in retirement, to at least one or two years’ worth of living expenses. Don’t go to all cash then, though, as retirements can last decades, and you may want a big chunk of your portfolio to keep growing for you.

My dumbest investment

My dumbest investment move was buying 300 shares of Shopify sometime around 2016, at $37 per share – and then selling after the stock tripled. I split the proceeds three ways – between shares of AT&T and ExxonMobil and paying off a truck loan. Now I sit on my front porch in a rocking chair, drinking beer and still thinking about those investment moves.

More recently, I bought some shares of a company at $18 and I am never, ever, ever, ever selling. (Though it has doubled, and I do need a new riding mower …) – Solomon, online

The Fool responds: This isn’t necessarily such a dumb investment. You did triple your money, after all.

But you’re right to notice that had you hung on, you could have made much more in Shopify. You sold around $111 per share – then Shopify went on to top $1,700 per share in November 2021. Note, though, that its shares have fallen sharply along with many other growth-stock shares: It was recently down nearly 63% from that high, to $657 per share.

AT&T and ExxonMobil are not likely to grow like gangbusters, but each was recently sporting a dividend yield above 4%. Meanwhile, it’s good to be aiming to never sell your new holding, but keep tabs on it, in case its future starts looking less rosy. You might even consider Shopify again, if you expect continued growth from it.

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