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3 Energy Stocks You Can Buy and Hold for the Next Decade

By Matthew DiLallo – Sep 27, 2021 at 11:15AM

Key Points

  • Energy is a big near-term growth driver for Brookfield Infrastructure.
  • Renewables are the primary power source for Clearway Energy's dividend growth plan.
  • Enbridge is slowly transitioning with the rest of the economy.

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These energy stocks should continue growing for years to come.

Fossil fuels have dominated the energy market for more than a century. However, that's changing as climate change fears drive investment in cleaner alternatives, like renewable energy.

This energy transition will take decades. Because of that, investors have opportunities to invest in the power sources of today and those of tomorrow. Three energy companies that appear well positioned for this interim period are Brookfield Infrastructure (BIP 3.73%) (BIPC 1.62%)Clearway Energy (CWEN -1.84%) (CWEN.A), and Enbridge (ENB -0.08%).

A person looking at icons representing falling carbon dioxide emissions.

Image source: Getty Images.

Steady growth

Brookfield Infrastructure operates a diversified portfolio of infrastructure businesses, including those focused on utilities, energy midstream, transportation, and data. The company's energy assets primarily transport and store natural gas. However, it's in the process of acquiring Canadian oil infrastructure company Inter Pipeline.

Brookfield's investment in Inter Pipeline shows its belief that fossil fuels will continue to play a vital role in powering the global economy for years to come. However, the company is also working toward a cleaner future. It has identified several opportunities to reduce its carbon emissions. In addition, it started a feasibility study for developing a green hydrogen export facility at its regulated terminal in Australia.

This dual focus has Brookfield positioned to deliver steady growth in the years ahead. This year, it expects to grow its cash flow per share by more than 20%, fueled by organic expansion and the Inter Pipeline deal. Meanwhile, it anticipates growing its roughly 4%-yielding dividend at an annual rate of 5% to 9% over the long term as it keeps expanding its portfolio. That should fuel attractive total returns, making it a solid energy stock to hold for the long haul.

Focus on the fuel of energy

Clearway Energy concentrates on owning wind, solar, and natural gas power-generating facilities. The company's focus in recent years has been on growing its renewable business. Its sponsor, Clearway Energy Group (CEG), develops wind and solar energy projects, giving Clearway Energy a steady stream of investment opportunities.

The company expects to secure enough investments to grow its 4.2%-yielding dividend by 5% to 8% annually. It has already lined up enough new investments to support that plan through 2023. Meanwhile, CEG has projects in its development pipeline through 2025. Because of that, Clearway Energy should continue growing for years to come, especially given the accelerating adoption of renewable energy to support the global efforts to combat the effects of climate change.

Slowly transitioning along with the market

Enbridge is one of the largest energy infrastructure companies in North America. It operates oil and gas pipelines, natural gas utilities, and renewable power assets. These businesses generate stable cash flow that helps support Enbridge's 6.7%-yielding dividend.

Enbridge expects to grow its cash flow per share at an annual rate of 5% to 7% through at least 2023. Fueling that plan is its multibillion-dollar expansion program, which includes building additional oil and gas infrastructure and more offshore wind farms in Europe. That should enable Enbridge to continue growing its dividend as it has in each of the last 26 years.

Meanwhile, Enbridge has plenty of fuel to continue growing beyond 2023. It has additional opportunities to expand its oil and gas pipeline operations, gas distribution and storage businesses, and renewable energy and low-carbon initiatives. The company is working to transition its business as the global economy moves toward cleaner alternatives. That includes building wind and solar assets and participating in emerging low-carbon opportunities like renewable natural gas, hydrogen, and carbon capture and storage. That should give Enbridge the fuel to keep growing for years to come.

Lots of growth is still ahead for these energy stocks

While the global economy is switching fuel sources, this transition will take decades. Because of that, we'll continue to use fossil fuels, which will benefit the legacy businesses of Brookfield Infrastructure, Clearway Energy, and Enbridge. Meanwhile, the transition will power new growth opportunities for these companies as they invest in renewable energy and emerging lower-carbon fuel sources. Because of that, they're great energy stocks to own during this interim period.

Matthew DiLallo owns shares of Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Clearway Energy, Inc., and Enbridge. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends Brookfield Infra Partners LP Units, Brookfield Infrastructure Corporation, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

Stocks Mentioned

Enbridge Stock Quote
$39.23 (-0.08%) $0.03
Brookfield Infrastructure Partners Stock Quote
Brookfield Infrastructure Partners
$35.03 (3.73%) $1.26
Clearway Energy Stock Quote
Clearway Energy
$33.10 (-1.84%) $0.62
Clearway Energy Stock Quote
Clearway Energy
Brookfield Infrastructure Stock Quote
Brookfield Infrastructure
$43.14 (1.62%) $0.69

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

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