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Losing Sleep Over Your Portfolio? Consider These Stocks

By Matthew DiLallo - Mar 18, 2017 at 7:00AM

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Enbridge, Brookfield Property Partners, and Brookfield Renewable Partners offer investors strong financials and a growing income stream.

Investors handle risk differently. Some have no problem loading their portfolio with riskier stocks while others just can't stomach high levels of risk. For those in the latter group, I have some good news: Plenty of stocks allow you to sleep soundly at night. In fact, the following three stocks have such boring business models that following them might just put you to sleep.

The energy toll road

Enbridge (ENB 0.95%) recently completed a game-changing merger, making it the largest energy infrastructure company in North America. However, that deal did more than just boost the company's size; it significantly strengthened its financials and long-term growth outlook. On the financial side, the transaction diversified the company's asset base so that it's now balanced between oil and natural gas assets. More importantly, the bulk of those assets provides stable and predictable cash flow, with 96% coming from take-or-pay, regulated, or equivalent assets.

Oil pipelines with blue skies above them

Image source: Getty Images.

That stable financial profile alone should enable investors to sleep soundly at night, knowing that the company's 4.5% dividend is on solid ground. However, Enbridge takes things a step further by offering investors low-risk growth. Backed by the largest backlog in the industry, Enbridge has clear visibility to grow its cash flow from operations by 12% to 14% annually through 2019, with the confidence that it can deliver 10% to 12% annual dividend growth through 2024. That's growth investors can literally take to the bank each year.

The real estate mogul

Brookfield Property Partners (BPY) offers investors a similarly stable business model, just with a different asset class focus. Instead of owning pipelines and processing facilities, it owns office buildings and malls. The company's office portfolio is 92% leased with an average remaining term of eight years, while its malls are 96.5% occupied. These leases provide very stable cash flow, which funds a distribution that currently yields 5.1%.

Meanwhile, the company expects its cash flow to continue growing due to several factors. First, many of its leases are below current market prices, which gives it the ability to capture higher rents when those contracts expire. Furthermore, it has a growing portfolio of opportunistic real estate investments such as multifamily, student housing, industrial, self-storage, and hospitality, which should deliver income growth and appreciation. Finally, it has several redevelopment and development projects underway, including building a core urban multifamily portfolio from the ground up. These growth drivers position it to grow its distribution by a 5% to 8% annual clip over the long term.

Office buildings in lower Manhattan

Image source: Getty Images.

The green energy giant

Brookfield Renewable Partners (BEP 1.15%) offers investors many of the same benefits as its sibling Brookfield Property, though its focus is on renewable power plants instead of real estate. That said, like its sibling these primarily wind and hydro plants provide it with steady cash flow thanks to the long-term nature of the contracts supporting the assets. Overall, 91% of Brookfield Renewable's cash flow comes from inflation-linked contracts that have an average remaining life of 16 years, which amply supports its current 6% distribution.

Not only will the company's cash flow rise with inflation thanks to those contracts, but it has several development projects in the pipeline that should provide incremental cash flow over the next year. It also has an excellent M&A track record and recently agreed to invest roughly $500 million in a large global wind and solar power portfolio. Given the company's track record and pipeline, it expects to be able to generate a growing stream of cash flow to support 5% to 9% annual distribution growth for investors.

Investor takeaway

These companies might not offer investors exciting growth prospects and the ability to double their money overnight. However, what they do offer are rock-solid business models backed by assets that generate very predictable cash flow, primarily secured through long-term contracts. Because of that, investors can sleep soundly knowing that they won't wake up to find out that one of these stocks blew up. Instead, they can bank on collecting a steadily growing income stream for years to come as these companies continue to build and buy more income-generating assets.

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Stocks Mentioned

Enbridge Inc. Stock Quote
Enbridge Inc.
$42.66 (0.95%) $0.40
Brookfield Property Partners Stock Quote
Brookfield Property Partners
Brookfield Renewable Partners L.P. Stock Quote
Brookfield Renewable Partners L.P.
$35.20 (1.15%) $0.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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