The Motley Fool’s Take
Brookfield Renewable Corp. has been a phenomenal wealth creator over the years. The renewable energy giant has generated annualized total returns of around 17% since its inception in 1999, growing an investment from $10,000 to more than $370,000.
Brookfield’s clean energy infrastructure business generates stable cash flow, primarily supported by long-term power purchase agreements that sell its power to utilities and large enterprises. In the long term, its goal is to return 70% of this cash flow to investors via its dividend.
The current bear market has given investors the opportunity to buy stocks at a bargain price, as they were recently around 30% below their 52-week high. This decline in its share price also pushed Brookfield’s dividend yield above 4%.
In addition to offering an attractive revenue stream, Brookfield also expects to continue its rapid growth. It expects its funds from operations to grow by about 10% or more per year until at least 2027, thanks to inflation-linked rate increases, higher electricity prices, development projects and potential mergers and acquisitions. Such growth should easily support Brookfield’s plan to increase its dividend at an annual rate of 5% to 9%. (The Motley Fool owns shares and recommended Brookfield Renewable.)
ask the fool
From VC to Wilmington, Delaware: What does it mean when a company has a “gap”?
The madman responds: Moats were used to prevent intruders from entering castles, and a business with a moat has one or more competitive advantages that can protect its market position and defend itself against competitors or potential competitors.
There are many kinds of competitive advantages, such as a strong brand, valuable patents, economies of scale, high barriers to entry, and high switching costs for customers. Boeing, for example, benefits from high barriers to entry: it would be extremely expensive for any company to try to start building planes. Many customers might not switch cable providers because it would be very complicated. Apple’s powerful brand means it can charge high prices for its offerings – and many customers end up with multiple Apple products, making it difficult to switch.
From PH to Erie, Pennsylvania: How do I know what stocks my mutual fund holds?
The madman responds: Typically, you can’t tell what a fund is holding on a day-to-day basis, but most funds publish lists of their holdings at least monthly or quarterly. You should be able to find these reports on fund company websites, as well as sites such as Morningstar.com — which offer information on a wide range of funds.
However, do not assume that a list is 100% up-to-date, as a fund may have sold some or all of its position in a stock since the report was published and may have loaded other securities. Some fund managers also practice “fronting” – selling some stocks that have suffered losses and buying others that have gained before the end of a reporting period to look better to investors.
school of fools
There are over 6,000 different stocks listed on the New York Stock Exchange and the Nasdaq Stock Market. It can be difficult to determine which of these might be terrific investments, so try online stock screeners to help narrow down a pool of candidates for your portfolio to a manageable size.
When using a stock screener, you define criteria describing the type of stocks you are looking for, and the analyzer will provide you with stocks that match them. For example, you might want stocks with market caps of at least $5 billion, earnings growth rates of at least 10%, price-to-earnings ratios of 20 or less, and dividend yields of 2. % or more.
If the filter returns way too many results, you can tighten your requirements a bit or add another one. If there are too few results, relax your requirements or eliminate one.
Screening can be helpful, but don’t rely on it blindly. There can be amazing stocks with most, but not all, of the desired characteristics; if so, the examiner will never bring them to your attention. Also, a filter is only as good as its data, so stick with reputable filters using reliable data. If you are unsure, do further research on any promising company.
There are many filters, some free and some not. Some offer a simplified free version and charge for more features.
To get started, check out the filters for stocks and/or mutual funds on Finance.Yahoo.com, Zacks.com, Finviz.com, StockRover.com and Morningstar.com. Your brokerage may also offer you a filter. Many filter services not only allow you to play around with their filter, looking for gems, but they also offer predefined filters, such as lists of promising dividend payers or small, fast-growing stocks.
However, do not base your investment decisions solely on the screening results, as they always omit certain factors that may be important, such as the quality of a company’s management and your confidence in it, the value of its or its brands and its competitive advantages.
My dumbest investment
From the ANR, online: My dumbest investment? I was the victim of a pump and dump scheme. I cracked because I would never have thought that a title could fall so low. On the other hand, it is the only stock of which I will ever own 100,000 shares. They are worth $90 in total today.
The madman responds: Many investors have invested much of their hard-earned money in penny stocks, unknowingly ending up as participants in pump-and-dump schemes. Penny stocks are those that trade for less than about $5 per share. They are usually linked to small, unproven companies whose shares can be easily manipulated. In a common pattern, people tout them in online communities and newsletters in order to inflate the stock price due to increased demand, then sell their stock, driving the price down.
Consider a representative penny stock, which recently traded at 7 cents per share. It would only cost you around $7,000 to buy 100,000 shares. That might sound like a bargain – after all, buying 100,000 shares of, say, Microsoft would cost you over $20 million! But Microsoft is very likely going to be worth more in the future, when a 7 cent stock, tied to a company with little revenue and years of losses, could very easily become a $0.02 stock, or even a tenth of a cent, especially if pumped and emptied.
Who am I?
My roots go back to 1891, when I was launched to distribute chemicals in New York. I published a manual of medical treatment in 1899 which proved very popular. I moved into pharmacological research in 1933 and entered the field of animal health in 1948. I was also a major player in the field of vaccines, helping to prevent pneumonia and hepatitis B, among others diseases. Today, based in Rahway, NJ, I am a pharmaceutical giant. My market value recently exceeded $250 billion and my annual turnover exceeds $50 billion. My medications include Singulair, Januvia and Keytruda. I merged with Schering-Plough in 2009. Who am I?
Don’t remember the trivial question from last week? Find it here.
Answer to last week’s quiz: VF Corp.