Energy is a crucial element not only for the economy but also for contemporary living. This makes it an ideal sector to explore for investment opportunities that are intended for the long run – stocks that can be acquired with the expectation of holding onto them indefinitely. Nonetheless, certain energy firms, such as those engaged in oil and gas drilling, can be unstable due to external influences, such as fluctuations in oil prices.
Instead, investors should contemplate energy firms such as Enbridge ( ENB -0.78% ) and NextEra Energy ( NEE -0.77% ) These companies have various ways of operating their businesses, such as involvement in renewable energy, which could contribute to sustained growth over time. Both stocks provide a mix of dividends and the potential for share price appreciation, all while being traded at appealing prices currently.
The greatest advantage is that they are affordable; you can purchase a portion of each for slightly more than $100 currently. Here is the essential information you should be aware of.
A stock with a strong reputation and consistent dividends, split into three parts.
Enbridge, a Canadian energy company based in the resource-abundant Oil Sands region of Alberta, derives approximately 75% of its earnings from this area. operations that occur in the middle of a process Enbridge is engaged in the transportation of oil and gas across a wide network of pipelines and storage facilities in North America. Unlike being affected by commodity prices, Enbridge earns revenue depending on the amount of resources passing through its pipelines. Enbridge also manages the largest natural gas utility in North America, supplying natural gas to households and commercial establishments. Additionally, Enbridge is expanding its renewable energy sector, but presently, it makes up a small portion of its overall profits.
The key aspect of Enbridge’s business model is its reliability. Enbridge’s pipelines consistently transport oil and gas, which are essential for heating homes, cooking, and generating electricity, regardless of economic conditions. This stable source of income has enabled Enbridge to consistently pay dividends to shareholders for 28 years, with a current yield of 6.9% and an average yield of 5.6% over the last ten years. The dividend payout ratio is only 65% of Enbridge’s cash flow, indicating that the high yield is sustainable. Enbridge’s growth is steady rather than rapid, with dividends being the main driver of investment returns.
Enbridge is consistently putting money into large projects, which can impact profits. Investors are advised to view Enbridge’s distributable cash flow as they would earnings and assess the stock’s value accordingly. The stock is trading at a valuation of less than 12 times Enbridge’s projected distributable cash flow per share for 2024. The company anticipates its cash flow to increase by a mid-single-digit percentage annually post-2026, making the current valuation seem reasonable, especially considering the initial high dividend yield. Investors can anticipate holding onto their investment and experiencing an average annual return of approximately 10% to 12% over time.
The top utility and renewable energy producer in the United States
If you are seeking expansion opportunities, consider exploring NextEra, a prominent player in renewable energy production. The company has evolved into a key global provider of renewable energy and is the largest electric utility in the United States, catering to more than 12 million individuals through 5.8 million accounts in Florida. NextEra Energy has outperformed the market in the long run due to its transition from polluting energy forms such as coal to cleaner alternatives like solar and wind power. Presently, NextEra stands as a significant corporation with a market capitalization approaching $160 billion.
There is still a lot of room for expansion in the next few decades. The U.S. Department of Energy reports that only 13% of the electricity produced domestically in 2022 came from solar and wind power, but this percentage is expected to increase in the future. Furthermore, the United States’ electricity demands are on the rise. Statista’s research suggests that the country’s overall electricity requirements will grow by 27% by 2050. Lastly, NextEra is poised to gain advantages from its presence in Florida. Official data shows that Florida has a rapidly growing population and economy, making it one of the fastest-growing states.
Investors are currently receiving a 2.6% dividend yield, which has been consistently increased by the management for 30 years. The company is expected to maintain its growth trajectory due to significant energy trends, providing investors with steady returns. Analysts predict an 8% annualized earnings growth rate for the company in the next three to five years, aligning with its performance over the last 15 years. While the growth may not be extraordinary, its reliability has the potential to generate wealth for investors. P/E ratio The current value is 23, which is lower than its average value over the past 10 years of 28, indicating that it may be a good opportunity to buy and hold onto this asset.
