There is a bifurcation taking place in the energy sector. One side is the old and dirty carbon economy, where Enterprise Products Partners (EPD +0.45%) operates. The other is the renewable power sector, which is where Brookfield Renewables (BEP +0.14%) (BEPC +0.00%) is quickly building out its business. Both of these energy investments are looking very attractive right now.
Enterprise sees plenty of opportunity
In Enterprise Product Partners' most recent shareholder presentation, this quote appears: "Global 2050 fossil fuel consumption (specifically oil, gas and coal) is expected to grow, furthering the necessity for energy 'addition' as the world population grows and economies develop."
It is accompanied by three bar charts showing the expectations for continued strong oil and natural gas demand from OPEC, the U.S. Energy Information Administration, and the International Energy Agency. Basically, the three most important energy watchers in the world all see a sustained future for carbon fuels through at least 2050.
Image source: Getty Images.
That's the backdrop for Enterprise Product Partners' hefty 7.3% distribution yield. The distribution backing has been increased annually for 25 consecutive years. The core business here is firmly rooted in the midstream sector, with Enterprise being one of the largest and most diversified owners of energy pipelines, storage, and transportation assets in North America. The vast majority of its business is fee-based, which means energy prices aren't a major issue (good or bad) for the master limited partnership (MLP).
NYSE: EPD
Key Data Points
To be fair, the high distribution yield is likely to make up a huge portion of an investors' total return; most of the attractive capital investment opportunities in the midstream space have already been built. But for dividend-focused investors, a slow and steady income stock with a reliable business should still be very appealing.
Brookfield Renewables is building the future
The big competition for carbon fuels is clean energy, a sector that has been growing rapidly. Brookfield Renewables is squarely focused on that sector, offering investors two ways to own it.
The first is a limited partnership, which has a yield of 5.9%. The second is a traditional corporation with a yield of 5.5%. They both represent the same entity, with Brookfield Renewable Corporation created so investors that can't own limited partnerships (such as institutional investors) can own it, too.
NYSE: BEP
Key Data Points
One of the more interesting features of Brookfield Renewables' portfolio is that roughly 50% of its revenue comes from hydro power. That's a very reliable business backed by an old and well-understood technology.
The rest of its revenue comes from solar, wind, and other assets, like batteries, which are where the growth is coming from. The portfolio is also geographically diversified, with assets across the Americas, Europe, and Asia. It is pretty close to a one-stop shop for investors looking to add renewable power to their portfolios.
NYSE: BEPC
Key Data Points
But here's the exciting part of the story. Brookfield Renewable currently operates around 32 gigawatts of power, but its pipeline of future projects is a whopping 132 gigawatts. So the real story here is growth.
Meanwhile, Brookfield Renewable Partners, the older of the two corporate structures, has increased its distribution annually since 2014. So, given the high yield today, it is screaming growth and income to anyone who takes the time to dig into the details.
Change, but not too fast
Clearly nobody wants to own a buggy whip company that is headed for the dustbin of history. A company building out modern technology would be better. But that's not exactly how the energy sector works because of the vast infrastructure required to power the world.
So if you are an income-focused investor, you should consider an old giant like Enterprise that you can complement with a new, higher-growth option like Brookfield Renewables. Sure, you could just pick one, but together these high yielders have you covered for the world as it exists today and as it will look tomorrow.
