The world is witnessing significant shifts in the energy sector driven by two major trends: a growing global population and the socioeconomic advancement of lower-income countries. These are pivotal factors when examining the ongoing clean energy transition. Understanding these dynamics clarifies why Brookfield Renewable Partners and Chevron emerge as compelling, inexpensive dividend stocks.
Historically, energy sources have evolved, transitioning from biomass to coal, and then from coal to oil. Despite new sources taking the lead, older sources like biomass and coal continue to play a significant role. Presently, oil and natural gas are predominant, but as clean energy gains traction, a complete takeover by solar or wind remains improbable. Experts agree that oil and natural gas will continue to satisfy global energy demands, due to increasing population and income levels, for decades.
Investors have two strategic choices: acquire stocks in a clean energy growth company like Brookfield Renewable Partners, or invest in traditional energy firms like Chevron, which will still capitalize on strong carbon fuel demand. Both stocks are attractively priced at the moment.
Chevron, an integrated energy giant, has seen its stock price decrease by approximately 20% since its apex in late 2022, paralleling the drop in oil prices. Chevron's diverse operations across upstream, midstream, and downstream sectors soften the financial impact of volatile energy prices. This conservative business model, coupled with a low debt-to-equity ratio of 0.15, allows Chevron to strategically manage its finances even when oil prices dip. Notably, Chevron has maintained a 37-year streak of increasing dividends annually, making its current low stock price appealing to dividend-focused investors. With a yield of 4.3%, Chevron offers a noticeably higher return than the S&P 500 and the average energy stock, presenting it as an enticing investment.
Similarly, Brookfield Renewable Partners offers an intriguing investment opportunity, with its units losing nearly half their value since a peak in early 2021. Despite the extensive growth potential in clean energy, market sentiment has shifted since the initial excitement. Though competition has increased, making profitability more challenging, Brookfield Renewable Partners stands out due to its financial resilience and consistent success. Over the past two decades, Brookfield's annual distribution has grown by about 6%, appealing strongly to income investors.
Brookfield Renewable's association with Brookfield Asset Management, a renowned global leader in infrastructure investment, enhances its credibility. However, as it actively buys and sells clean energy assets, it requires close monitoring by investors. Featuring a 5.5% yield, Brookfield offers a significantly higher return than the average utility.
In summary, if you're seeking undervalued dividend stocks, Chevron and Brookfield Renewable Partners should be on your radar. Both offer attractive yields at compelling prices, each representing different facets of the clean energy revolution while ensuring long-term income potential.
