Investors go to extremes to the upside and the downside. That can provide contrarian types with opportunities to buy stocks at reduced prices even when the long-term outlook for a company still looks solid. That's pretty much what's going on with Brookfield Renewable Corporation (BEPC -0.89%) and Hannon Armstrong Sustainable Infrastructure Capital (HASI -2.00%) today, with both off around 25% from their January 2021 highs. Here's a quick look at each.
Plenty of growth ahead
Brookfield Renewable Corporation is the sister to Brookfield Renewable Partners. It's basically a corporate structure of the partnership, which makes it easier for institutional investors and some private investors to own. For small investors there's the benefit of less tax headache by avoiding the partnership design. Brookfield Renewable Corporation has a generous 3% dividend yield, higher than the S&P 500 index's yield of 1.3% today.
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There are a couple of things investors will find attractive here. For starters, its portfolio is spread across different clean energy technologies. That includes solar, wind, and hydro, which are the core of its asset base together making up around 87% of its cash flow. The remaining 13% comes from "transition" assets, which include things like batteries. It also diversifies geographically, with assets in North America, South America, Europe, and Asia. It's sort of a cover-all-the-bases investment for exposure to clean energy.
But the really interesting thing about Brookfield Renewable Corporation is its expansion plans. It currently has 21 gigawatts of operating capacity with active development intentions for another 61.5 gigawatts. That will nearly triple the size of its capacity and help to support the company's plan for annual dividend growth of between 5% and 9%. So not only are you getting a lot of "green" in your pocket today, but that cash will likely keep up with inflation over time, as well.
Investing through the back end
Let's say you don't want to own a company that owns physical clean energy assets. There's another option in real estate investment trust (REIT) Hannon Armstrong. Technically speaking it is classified as a mortgage REIT because it makes loans to companies that are backed by physical assets. The trick is that the loans this company makes aren't backed by houses or offices, they are backed by clean energy assets. Moreover, the interest payments Hannon Armstrong collects are backed by the long-term contracts for selling power from the collateral assets involved. It's actually a pretty interesting way to invest in the clean energy sector.
And, like Brookfield Renewable Corporation, Hannon Armstrong sees substantial growth ahead. It expects to capitalize on a $4 billion investment pipeline, helping it to take advantage of its partners' investments in everything from solar to wind to storage. To give you an idea of just how big that is, the company's current loan portfolio is valued at around $3.6 billion. Basically, Hannon Armstrong thinks it can double in size.
Hannon Armstrong's yield is roughly 3.3%. And while its dividend has been moving generally higher since its initial public offering, it has only been public since 2013. That said, it did manage to get through the pandemic without skipping a beat, hiking its dividend in both 2020 and 2021. If you can handle the added complexity of owning a mortgage REIT, this is a good way to collect cash from clean energy investments without actually owning any clean energy investments.
Time for a deep dive or two
It can be hard to figure out which way the Wall Street winds are blowing, given that group emotions are such an important factor for prices. However, it looks pretty clear that clean energy is going to be an increasing piece of the energy puzzle. And, with that as a background, Brookfield Renewable Corporation and Hannon Armstrong are two diversified ways to play the space while collecting generous dividends.
