You've worked long and hard to earn what you have. You've built a sizable nest egg -- one that represents the sum of your life's efforts. And now it's time to begin thinking about how to generate income from your assets to fund your retirement. But which investments are best?
What you're seeking are high-quality businesses with powerful competitive advantages -- companies that can provide you with a passive income stream, ideally one that will rise over time. Fortunately, there are some excellent investments that fit this description. Here's a look at two of the best available in the market today: Spectra Energy Partners (NYSE: SEP), and Brookfield Renewable Partners (NYSE: BEP)
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The pipeline titan
Spectra Energy Partners is one of the country's largest natural gas master limited partnerships (MLP), with more than 15,000 miles of transmission pipelines and 170 billion cubic feet of storage facilities. These nearly irreplaceable assets extend across the U.S. to virtually all major supply basins and key demand markets.
Spectra's economic moat is built upon its long-haul pipelines, which cross state lines and are difficult to get approved. The huge cost and regulatory hurdles competitors would face to build competing pipelines help to protect Spectra's profit margins and strong, recurring cash flows. In turn, Spectra is able to reward its investors with a bountiful and steadily rising stream of dividend income. This best-in-class MLP currently yields 8.5% and has raised its quarterly cash distribution for 41 consecutive quarters.
Best of all, Spectra's units are trading at a bargain price of less than 11 times distributable cash flow. That's a terrific price for such a competitively advantaged business, particularly in today's yield-starved world. If you're a 60-year-old investor looking to add a great business and a solid stream of dividend income to your diversified portfolio, you may want to consider buying Spectra Energy Partners today.
The clean-energy star
One of the few risks to an investment in Spectra is the growth of renewable energy sources, as these threaten to take share from fossil fuel energy sources. A way to hedge this risk, therefore, is to buy a top-tier clean-energy business, as well, and the best among them is Brookfield Renewable Partners.
Brookfield Renewable Partners is one of the world's largest publicly traded renewable power companies. It owns 840 generating facilities spanning across 14 countries in North and South America, Europe, and Asia. Together, these increasingly valuable assets have 16,400 megawatts of electricity generation capacity, or enough to power more than 11 million homes.
About 80% of Brookfield's portfolio is comprised of hydroelectric power assets that produce strong and reliable cash flows. The company is also expanding into wind and solar -- two high-growth areas that are expected to produce a rapidly expanding share of electricity generation in the U.S. and many other areas of the world in the years and decades ahead.
In turn, Brookfield believes it can grow its funds from operations by 6% to 11% annually, fueling a 5% to 9% yearly increase in its cash distribution payout -- which already yields a hefty 6.4% -- and 12% to 15% annual total returns to investors over the long term. That's a powerful wealth-building formula and a good reason for 60-year-old investors to consider buying Brookfield Renewable Partners today.
