Brookfield Renewable’s clean energy potential

Investors bullish on the growth prospects of clean energy should take a look at Brookfield Renewable (NYSE: BEPC).

The company directly owns physical clean energy assets; hydroelectric power generates the lion’s share of its portfolio’s power, with solar, wind and other assets (like batteries) making up the rest.

Brookfield has a strategy of acquiring operating platforms with built-in growth.

Earlier this year, it agreed to acquire Duke Energy’s commercial renewable energy platform, which has 5.9 gigawatts (GW) of assets operating or under construction, along with a 6.1 GW development pipeline.

That deal, and others, will supply Brookfield with incremental income from the operating assets as well as growth from the development pipeline.

Overall, Brookfield is aiming to grow its funds from operations (FFO) by at least 10% annually over the coming five years.

Brookfield Renewable is also a solid dividend payer, having increased its payout every year since 2016 at a compound annual rate of roughly 6%.

You can buy the stock in two different forms that have slightly different yields and tax treatments: a limited partnership (ticker symbol BEP) or a traditional corporation (BEPC).

Sticking with BEPC will keep things simpler, taxwise. (The Motley Fool owns shares of and has recommended Brookfield Renewable.)

Ask the Fool

Q. What main stock indexes are there? – D.M., Scottsdale, Arizona

A. The Dow Jones Industrial Average, launched in 1896, is one of the oldest and most widely referenced, but it contains only 30 companies – like Apple, McDonald’s, Microsoft, Nike, Walmart and Walt Disney.

The Standard & Poor’s 500 is much broader, featuring 500 of America’s biggest companies; examples include Amazon.com, Best Buy, Clorox, Dollar General, Hasbro, Hershey, Home Depot, Johnson & Johnson and Tesla.

Together, the 500 companies make up about 80% of the total market value of U.S. stocks, so the S&P 500 is often referenced as a proxy for the entire stock market.

Another key index, the Wilshire 5000, includes almost every publicly traded U.S. company.

The Russell 3000 index contains roughly 3,000 U.S. companies (including small, medium and large ones), which together represent close to 98% of the U.S. market.

The Russell 1000 is composed of the 1,000 largest companies in the Russell 3000, while the Russell 2000 comprises the 2,000 smaller companies in it.

There are many other major indexes, such as the FTSE Global All Cap, which aims to represent the entire world’s stock market; it encompasses more than 10,000 companies of varying sizes from dozens of countries, some with developing economies.

Various other indexes represent different countries, geographical regions, sectors or industries. And some focus on assets other than stocks, such as bonds.

Q. What’s a “real” return? – A.B., Troy, Michigan

A. It’s a gain that has been adjusted by subtracting the effect of inflation.

For example, if an investment has averaged annual gains of 10% over a period when inflation averaged 3%, the real average return would be about 7%.

My Dumbest Investment

My most regrettable investment was buying shares of Under Armour back in early 2016.

Two years later, I was still underwater on it. I thought it would be a good investment, in part because I saw its logo everywhere on lots of people’s clothing.

I learned that I prefer stocks that pay dividends.

Dividends help you get a return even if you have to wait for a company to turn its fortunes around.

Dividends also allow you to use dollar-cost averaging, if you reinvest them in additional shares of stock.

I’ve since moved that money to Apple, which is a dividend payer and a growth stock – the best of both worlds. – M.C., Apex, North Carolina

The Fool responds: Under Armour has been a popular brand of sportswear, but its stock has delivered mixed results in recent years – and it’s now more than 80% below levels it hit in 2016.

The company has faced strong competition from Nike and Adidas, and (like many other companies) was hurt by supply chain issues related to COVID-19.

Currently, it has a relatively new CEO and doesn’t have a strong defensive moat relative to its rivals.

Still, the stock price has fallen so low that many now see it as attractively priced.

You’re correct that favoring dividend-paying stocks is a smart move for most investors.

Companies paying dividends are generally more stable, with income dependable enough that management is comfortable committing to regular payouts.