Bear markets can be scary times for investors. The news often seems bleaker by the day as investors and analysts focus on the negatives. That can make it hard to put money to work on new investments.
However, bear markets eventually give way to a new bull market. That's why it's important to have a long-term mindset and focus on companies that can survive the current market challenges and thrive when they improve. Three companies that look like great long-term buys amid the current bear market are Enterprise Products Partners (EPD 1.41%), Clearway Energy (CWEN 1.29%) (CWEN.A 0.90%), and Brookfield Infrastructure (BIPC 3.21%) (BIP 3.35%). Here's why three Fool.com contributors believe you shouldn't be afraid to add these top stocks to your portfolio right now.
Plenty of room to spare
Reuben Gregg Brewer (Enterprise Products Partners): In the second quarter, midstream master limited partnership (MLP) Enterprise Products Partners' distributable cash flow covered its distribution by a huge 1.9 times. A lot would have to go wrong before the North American midstream giant's generous 7.4% distribution yield was at risk. In fact, given the robust coverage, increases seem far more likely. Note that the distribution has already been hiked 24 years in a row.
Adding to that positive outlook for the distribution is the fact that Enterprise's balance sheet is rated investment grade, giving it solid access to capital. And that it has roughly $5.5 billion worth of capital investments in the works that will increase its cash flows once they are completed. It's also important to note that Enterprise's network of energy infrastructure is largely fee based, with the MLP getting paid for the use of its assets in an industry that's still seeing strong demand.
Fears about a wholesale shift to clean energy, meanwhile, are likely overblown. Indeed, energy transitions are expensive and time consuming, so the carbon fuels Enterprise handles are unlikely to go away anytime soon. The MLP also has opportunities to adjust with the times and move things like biodiesel, so there's likely to be life beyond oil and natural gas, too. All in, the fat yield on offer here is attractive both today and for the long term.
A solid play in a high-growth industry
Neha Chamaria (Clearway Energy): Down about 14% in one month as of this writing, Clearway Energy stock makes for a compelling buy for the long term. There are three broad reasons why: Clearway Energy is one of the largest players in the high-potential renewable energy industry in the U.S., generates stable cash flows, and is committed to dividend growth.
Currently yielding 4.5%, Clearway Energy expects to grow its dividend annually by 5% to 8% through 2026, underpinned by steady cash-flow growth. Clearway Energy is in fact confident of growing its payout at the upper end of its annual target range as the company already generates stable cash flows from the power it sells under contracts, and is now deploying capital to further boost its returns on investments. For example, Clearway Energy recently sold its thermal assets for $1.9 billion, and part of the proceeds that it has already deployed so far in large renewable projects in wind and solar could boost its cash available for distribution (CAFD) by almost $2.10 per share.
A higher CAFD should mean bigger dividends for shareholders, and this factor alone is one of the biggest arguments in favor of investing in Clearway Energy stock. The thing is, dividend growth has added significantly to the returns for shareholders in Clearway Energy in recent years, and the trend looks like it's here to stay.
With the renewable energy industry pegged to grow rapidly in the coming years, Clearway Energy shouldn't have a problem growing its asset base and cash flows, and therefore dividends and shareholder returns.
Selling off despite another strong year
Matt DiLallo (Brookfield Infrastructure): Shares of global infrastructure giant Brookfield Infrastructure have tumbled more than 20% from their peak earlier this year. That sell-off comes even though 2022 will be a record year. The company expects to deliver 11% growth in its funds from operations (FFO) per share, powered by strong organic growth and its value-enhancing asset rotation strategy.
Brookfield sold four businesses this year and has three more in process, which should generate $2.4 billion in proceeds. It used that money to fund five new investments that will boost its FFO immediately while driving enhanced growth in the coming years. Brookfield also replenished its expansion project backlog, driven partly by its investment to help Intel build two new manufacturing plants.
These investments have Brookfield on track to deliver another year of above-average growth in 2023. The company sees its FFO per share rising another 12% to 15% amid the potential backdrop of a global economic downturn. That's largely due to its highly resilient business model that features long-term fixed-rate contracts with inflation-escalation clauses. With inflation running hot, Brookfield's rates will continue rising at an above-average pace next year.
Longer term, Brookfield continues to forecast that it can deliver organic growth in the range of 6% to 9% per year. Meanwhile, its capital recycling strategy should provide an additional boost. These drivers support the company's plan to grow its 3.6%-yielding dividend by 5% to 9% per year.
The bear market is giving investors a gift. They can buy shares of Brookfield Infrastructure at a 20% lower price even though its underlying business is delivering accelerated growth in the near term while the long-term outlook remains bright.
