The global economy is undergoing a significant shift in fuel sources, which is causing the energy industry to undergo a transition. While it continues to supply the world’s current fossil fuel needs, it is also investing in lower-carbon energy for the future.
In light of this direction, the best energy stocks to hold for the long term are those that are focused on a lower-carbon future. Brookfield Renewable (BEPC -1.06%, BEP -1.03%), Enbridge (ENB 0.62%), and Southern Company (SO -0.19%) stand out for their growing low-carbon businesses. These companies are great options for anyone looking to invest $1,000 in the energy sector’s future.
Brookfield Renewable is fully committed to clean energy. It operates one of the world’s largest renewable energy platforms and has a growing sustainable solutions platform. Its current operating portfolio consists of hydroelectric, wind, solar, and storage assets with the capacity to generate 31 gigawatts of clean power per year, offsetting all the carbon emissions of France.
However, Brookfield Renewable is only scratching the surface of its power-producing potential. It has 143 gigawatts of renewable power projects in various stages of development, along with investments in carbon capture and storage, renewable natural gas production, materials recycling, solar panel manufacturing, and green ammonia. These investments are expected to drive significant earnings growth in the coming years, along with rising power prices and mergers and acquisitions. Brookfield Renewable anticipates growing its cash flow per share by more than 10% annually through at least 2028, while also increasing its dividend by 5% to 9% per year.
Enbridge, an oil pipeline giant, has been steadily shifting to lower-carbon energy over the years. It expects natural gas transmission, gas distribution, and renewable power to contribute to half its earnings this year, up from 43% last year. This shift is powered by its pending acquisition of three natural gas utilities from Dominion and investments to grow its gas transmission and renewables earnings.
Enbridge currently has $17.8 billion of expansion projects in its backlog, with the majority focused on lower-carbon energy. It is investing in new natural gas pipelines, a liquefied natural gas facility, expanding its natural gas utilities, RNG projects, and offshore wind farms in Europe. It also has several more lower-carbon projects under development, including potential expansions into the carbon capture and storage and blue ammonia sectors. Enbridge expects its lower-carbon investment strategy to drive approximately 5% annual earnings per share growth over the medium term, supporting its 7.5% dividend yield.
Southern Company, a leading utility, operates electric companies in three states and natural gas distribution companies in four states. It also has a growing commercial power business that generates renewable electricity sold to third parties. The majority of Southern Company’s power currently comes from lower-carbon sources, with natural gas accounting for 52% of its power mix in the third quarter.
Southern Company is gradually phasing out coal by increasing its generation capacity from lower-carbon energy sources. It is in the process of completing a major expansion of its nuclear power capacity, investing over $10 billion to build two new nuclear-power-generating units. These investments are expected to increase its operating cash flow by $700 million annually. This additional cash flow will enable Southern Company to increase its dividend (currently yielding 4.1%) and invest in its transition to lower-carbon energy, supporting attractive total annual returns over the long term.
In conclusion, Brookfield Renewable, Enbridge, and Southern Company are all heavily investing in lower-carbon energy, which is expected to drive their cash flows and enable them to increase their higher-yielding dividends. This combination positions these energy stocks to generate strong total returns, making them attractive long-term investment options for individuals looking to invest $1,000.
