Best stock to invest in
The recent pullback in stock prices in the U.S. equity market has
opened the door to some interesting dividend yields. Investors
with a taste for environmentally-friendly businesses have some
particularly interesting alternatives that can pump up the purse as
well as protect Mother Earth.
(AES: NYSE) is a world-class power generator from mixed
portfolio of conventional and renewable power sources. About
28% of its 29,352 megawatts of generation capacity is from renewable
fuel sources, including hydro, biomass, solar and wind, and another
33% from plants using natural gas. The balance of AES’s power
still comes from fossil fuel, including a good amount from
coal-fired plants. Indeed, AES just recently commissioned a
new 1,240 megawatt coal-fired power plant in Vietnam.
In the twelve months ending June 2016, AES also generated $2.9
billion in operating cash flow on $14.1 billion in total
revenue. Cash flow helps cover the interest burden from $20.8
billion in debt as well as dividend commitments. The current
dividend rate is $0.44 per share, providing a dividend yield of 3.8%
at the current price level.
Among other real estate investments, Brookfield Asset Management
(BAM: NYSE) holds interests in hydroelectric power plants and
transmission facilities in the northeastern part of the
U.S. As an asset management company Brookfield provides
investors with consistent income stream without the technology risks
of most renewable energy stocks. Brookfield owns 200
hydroelectric power generation facilities in North and South
America, 35 wind power projects on three continents, and four
biomass plants in Brazil. Additionally, Brookfield has invested in a
600-megawatt pumped storage facility in Massachusetts. The
Brookfield portfolio also includes gas and electric utility services
with over 2.6 million connected customers. The company
generated $2.8 billion in operating cash flow on $23.4 billion in
total sales in the twelve months ending June 2016.
Brookfield shares are trading at 32.8 times the consensus estimate
for 2017. That might seem pricey in comparison to the utility
industry that is trading closer to 18 times forward earnings.
However, Brookfield is also generating double digit growth.
Shareholders are also getting 1.5% dividend yield at the current
For those investors who are not bothered by expensive valuation
metrics, Covanta Holding
NYSE) is trading at 185 times projected earnings. Operating 25
waste-to-energy and materials processing facilities across the
country, Covanta represents the twenty-first century sustainable
enterprise. Although its metals recovery business has
struggled against low selling prices, Covanta’s position in the
waste handling industry remains solid. The company earned $45
million in net income on $1.7 billion in total sales in the twelve
months ending June 2016. Covanta shares offer a 6.6% forward
dividend yield at the current price level.
A better bargain can be found in ethanol fuel producer Green Plains, Inc. (GPRE:
Nasdaq), which trades at 15.6 times forward earnings.
Unfortunately, the company’s financial profile is much less
appealing. In the twelve months ending June 2016, the company
incurred a net loss of $13.4 million on $3.1 billion in revenue from
ethanol and corn by-products. The half dozen analysts who
cover the company apparently believe the bad times are only
temporary and have projected $1.72 in adjusted earnings per share on
$4.0 billion in sales in fiscal year 2017.
Green Plains is the third largest ethanol producer in the world,
operating seventeen plants in the U.S. that have the capacity to
produce 1.5 billion gallons of ethanol per year. A meaningful
stake in ethanol production in the world requires a position in
Debra Fiakas is the Managing
Director of Crystal Equity
Research, an alternative
research resource on small capitalization companies in selected
Neither the author of the Small Cap
Strategist web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.
– Best stock to invest in