The Best High-Yield Energy Stock to Invest $200 in Right Now

Source The Motley Fool

If you have $200 available to invest that isn't needed for monthly bills or to pay down short-term debt, you might want to put it toward adding a few shares of Brookfield Renewable (NYSE: BEP)(NYSE: BEPC) to your portfolio. There are multiple reasons why you might want to do this, including the high yield this energy investment is offering right now.

If you are an income investor, here's why Brookfield Renewable should be on your shortlist today.

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What does Brookfield Renewable do?

As Brookfield Renewable's name implies, it is focused on the renewable power sector. The world is transitioning from the dominant energy source being carbon-based fuels to the dominant energy source being cleaner alternatives in the renewable power space. This is not going to be an overnight event -- it will likely play out over decades. While it won't mean the end of carbon fuels, it seems like there is huge growth ahead for wind, solar, battery storage, and nuclear power.

A person in work gear looking at blueprints, with wind turbines in the background.

Image source: Getty Images.

Brookfield Renewable operates in every one of those niches and is a large player in hydroelectric power, an energy source with more constraints on growth. It's one of the most diversified clean energy businesses you can buy. Add to that a reach that spans across North America, South America, Europe, and Asia, and this is basically a one-stop shop for clean energy investing. And it has a proven track record, with dividend increases averaging 6% a year over the past 20 years or so (it wasn't a public entity through all of that period).

Brookfield Renewable takes a unique approach

Given Brookfield Renewable's electricity focus, many investors might consider it to be a utility-like investment. That's not unreasonable, since its power sales are usually backed by long-term contracts. However, Brookfield Renewable is not a regulated utility, which might have material assets in just one region that it maintains and develops over time in conjunction with regulators. Brookfield Renewable, in contrast, is actually very active on the acquisition and disposition front.

Brookfield Renewable likes to step in to buy assets when they look cheap. It then attempts to add value by investing in the assets and running them at a high level. Finally, it will sell assets if it gets a good price. The proceeds are used to repeat the process over again. Sure, there are some assets that management won't sell (hydroelectric is virtually irreplaceable due to its nature, for example). But it's more like an asset manager than a utility, which makes sense given that Brookfield Renewable is run by large Canadian asset manager Brookfield Asset Management (NYSE: BAM).

The dividend's steady growth over time, however, shows that the active approach has worked fairly well. Buying Brookfield Renewable is basically a way to invest alongside Brookfield Asset Management in a growing global energy niche.

More than one way to reach a goal

There are other nuances here to consider. For example, Brookfield Renewable is really a funding vehicle for Brookfield Asset Management's clean energy investments. That's why there are two versions of Brookfield Renewable -- one is a partnership, and the other a regular corporation. They represent the same entity and pay the same dividends.

Some large investors can't buy partnerships, so Brookfield Asset Management created the corporate share class to attract more capital. The partnership, which is largely for small investors, has a 6.8% yield. The corporate share class, based only on demand for the different class since they represent the same entity, has a lower 5.6% dividend yield.

BEP Chart

BEP data by YCharts.

There's another reason to like Brookfield Renewable right now. Energy policy in the U.S. market is a bit uncertain, which could upend investment plans for U.S.-focused clean energy businesses. At the very least, it could lead to material investor trepidation. But Brookfield Renewable's globally diversified portfolio means it can pivot to other regions as the U.S. figures out how to move forward on the clean energy front.

The time is nigh for Brookfield Renewable

If you like the idea of owning a clean energy investment, Brookfield Renewable is going to cover a lot of ground for you. Putting that $200 toward buying now will get you into a stock that has been feeling the pinch of negative investor sentiment, pushing the yield up to very attractive levels even though management remains upbeat about long-term growth opportunities. If you think in decades and not days, Brookfield Renewable, in either form, should be very attractive to you today.

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Reuben Gregg Brewer has positions in Brookfield Renewable Partners. The Motley Fool has positions in and recommends Brookfield Asset Management. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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