In this article [the author] will cover the following alternative choices for participation in the renewable energy sub-sector:
- Brookfield Renewable Partners L.P. (BEP)
- Algonquin Power & Utilities Corp. (AQN)
- Atlantica Sustainable Infrastructure PLC (AY)
- Clearway Energy Inc. (CWEN)
- The Cushing Renaissance Fund (SZC)
- Kayne Anderson Midstream/Energy Fund (KMF)
Both of the closed-end funds – (SZC) and (KMF) are of interest since both are in the process of converting from primarily midstream MLP funds to more diversified sustainable energy funds, supplemented by infrastructure and mostly related sectors. Before getting into these more unique players let’s briefly discuss the four stock alternatives.
Brookfield Renewable Partners L.P.
(BEP) owns renewable generating facilities (hydro, wind, solar, biomass and battery storage facilities) in North and South America, Europe and parts of Asia. It is arguably the “cream of the crop” in the area of renewable resources.
The stock has recovered from a low around $24 in late March 2020 to its current high of just over $44 today. The stock yields four percent, and while it certainly bears watching, I believe that it is presently overbought.
Algonquin Power & Utilities Corp.
Algonquin (AQN), has a strong presence in both Canada and the United States, and generates and sells electric energy, and clean energy generated by hydropower, thermal, solar and wind facilities. They also operate as a utility company, providing water distribution, wastewater collection, and natural gas services.
The stock price has recovered from a low in the mid-$9’s in March 2020 to its present level around $14. It pays a quarterly dividend which was just increased to $.155 in June. It is yielding just under five percent.
Atlantica Sustainable Infrastructure PLC
(AY) is a European company, headquartered in London. Their assets operate in the United States, South America, Canada, Europe and portions of Africa. Operating segments include: renewables, natural gas, transmission and transportation infrastructure and water assets.
The company’s price cratered back in March 2020 (along with everyone else) around the $19 level, and has since recovered to just over the $31 level, close to its former highs.
Dividends have consistently increased from $.26 quarterly in 2017 to current levels of $.41, for a present yield of close to five and one-half percent.
In light of the recent run-up, my thoughts are that (AY) is a bit over-priced and might be bought at lower levels in the next few months.
Clearway Energy, Inc.
Clearway (CWEN), is a diversified renewable energy producer, providing primarily co-generation and thermal infrastructure in the United States. They are also a provider of wind, solar and natural gas energy.
After reaching a low in the $16’s back in March of this year, (CWEN) has rebounded into the mid-$20’s.
After increasing until late 2018, the dividend was reduced from $.33 to current levels of $.21. The yield at the current stock price of $26 is still just under five percent.
Cushing NextGen Infrastructure Income Fund (Formerly Renaissance Fund)
The Cushing Renaissance Fund (SZC) formerly focused on oil and natural gas energy companies, including midstream MLP’s. Approximately six months ago the fund changed both its name and investment objective. The new fund name is Cushing NexGen Infrastructure Income Fund (symbol remains the same). In June they also accomplished a one for four reverse split.
Commensurate with this, the fund changed its investment focus to sustainable infrastructure, energy infrastructure, industrial infrastructure and technology and communications infrastructure companies.
As part of the re-organization the monthly dividend was changed from $.547 to a more reasonable $.213.
(SZC) is currently priced at a large discount (26%) to its net asset value (NAV). At the present price of just under $32, SZC yields slightly over eight percent.
Presently, the fund owns a portfolio comprised of natural gas and crude pipelines, solar companies, integrated utilities, refiners, REITs, cloud storage services, and waste positions. The portfolio composition seems to still be evolving.
Kayne Anderson Midstream/Energy Fund
(KMF), like (SZC) is slowly changing over to a fund that will be substantially invested in renewable and sustainable resources. Whereas, formerly the fund focused completely on midstream MLPs, in July, Kayne Anderson announced that (KMF) will be re-positioned to focus on the “next generation” of companies within the energy and infrastructure sectors.
It will be re-named Kayne Anderson NexGen Energy & Infrastructure Fund, retaining the same stock symbol.
From the July 31 factsheet, it can been seen that the transition has already begun. Renewables hold four of the top ten positions in their portfolio.
In March 2020, the (KMF) stock price dropped close to $1.00 per share. It has since rebounded to almost $5, but still carries a 26 percent discount to NAV. The distribution has changed from $.075 a month to $.09 quarterly, for a current yield of 7.5 percent.
The Immediate Future For Renewables
With a potentially tempestuous election coming this November, the future energy scenario for our country could be up in the air. On the one hand President Trump, if re-elected would be a staunch advocate for continuing the emphasis on oil and natural gas (if fact, while I was composing this article he was speaking about opening the Arctic National Wildlife Refuge to drilling), while Biden would quickly switch to an emphasis on renewable and sustainable energy sources. I believe that even if Trump is re-elected we will see continued development of renewable energy sources, just not with as great an emphasis as we would see under a Biden administration.
So, there will be future opportunities for renewables, but probably greater opportunities under Biden.
While I remain content with my position in (EVA), I have no plans to add any renewable energy stocks to the Protected Principal Retirement Portfolio until the election is under our belts (hopefully this year – LOL).
In the interim, I wish to monitor each of the above stocks and funds. I would prefer to add after we get our next correction, which I would like to think is coming before year-end.
If I were asked to prioritize my investment preferences, they would be as follows:
1. Purchase (BEP) in the mid-$30’s, or
3. Purchase one of the two closed-end funds.
This is an interesting topic, one where my knowledge has always been fairly limited. I really look forward to receiving your comments and/or suggestions.
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