Could Enviva (EVA -3.64%) be the top energy stock in the long run? In this clip from "The High Energy Show" on Motley Fool Live, recorded on May 31, Motley Fool contributor Tyler Crowe makes the case for why this wood pellet manufacturing company with a strong dividend could make a top stock pick in the future.
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Tyler Crowe: The very first one I'm going to pick is called Enviva Corporation.
Travis Hoium: What's the ticker?
Crowe: E-V-A.
Jason Hall: I'll be putting together a list of the tickers and getting them into Slido, Fools.
Crowe: What they do is they manufacture wood pellets and export them mostly to Europe and Japan. Most of their operations are in the Southeastern United States. They own or at least have operating agreements with several ports in the Southeast for shipping wood pellets overseas. The idea from a future of energy thesis is that wood pellets on a full-cycle analysis of burning wood pellets is significantly lower in carbon than in the consumption of coal. However, using wood pellets can be a drop-in replacement for boilers that currently use coal. You have this option where you can take a lot of existing power-generating assets that are already built into the centralized grid and make a significant carbon reduction to what they do today. The other added benefits when I'm looking at it from an investment idea too, they operate everything on very long-term takeaway contracts. I think their entire capacity is fixed on contracts for the next 20 years to export. As a result, they have very strong revenue stability that can plan out their expansions into the future and they pay a great dividend. I actually have to look up the dividend right now. I believe it's in the 4% range. Unless Jason has it in front of him.
Hall: I will pull it up. I think it might be up a little bit because the stock prices has.
Crowe: 4.39%. Now, it used to be a master limited partnership with a really weird structure with a parent organization, which they got rid of. Thankfully, that was like the biggest hang-up I ever had on that company was this weird situation with its parent company. But now that that's gone, I think it looks much more attractive because shareholder alignment.
Hall: There's two parts of that. There's the better alignment that you get, but also there's tons of very large investor pools of money that won't buy partnerships. They won't because of tax implications and all that stuff. Now, it's a corporation.
Crowe: Better governance.
Hoium: Yes.
Crowe: Your vote actually matters in shareholder votes. There's a better alignment and better shareholder friendliness with it.
