Top Energy Stocks to Consider Purchasing in April

Top Energy Stocks to Consider Purchasing in April

Energy stocks are off to a roaring start through 2024. The average energy stock has gained more than 12.5%, as measured by the Select Energy Sector SPDR ETF. This exceeded the equally hot S&P500That’s a gain of 10.2%.

However, there are still exciting opportunities in the sector. Enbridge (NYSE:ENB) And Brookfield Renewable Energy (NYSE:BEPC)(NYSE:BEP) stand out as two of the best energy values to buy in April. Here’s why they could fuel high total returns from here.

Improving through agreement

Enbridge had a very slow start to the year, with shares barely moving. This is a headache, given that the Canadian pipeline And utility the giant’s progress already this year. In early February, Enbridge reported strong fourth-quarter results. It reported a 6% increase in adjusted revenue EBITDA Last year was the 18th consecutive year it achieved its financial goals. Meanwhile, a month later, Enbridge extended its visible growth outlook through 2026, forecasting annual adjusted EBITDA growth of 7% to 9% during that period.

One of the factors fueling its growth is the imminent acquisition of three natural gas utilities Domination. The company hailed the $14 billion transaction as a “once-in-a-generation” opportunity. It completed the first of three utility acquisitions last month and plans to complete the other two by the end of this year.

Meanwhile, the company got another interesting investment opportunity last month. It formed a joint venture to combine its Rio Bravo pipeline project with a few other pipelines to create a premier gas supply system from the Permian Basin to the Gulf Coast. The transaction will have an immediately accretive effect on its results, diversify and increase its cash flows, optimize its balance sheet and strengthen its growth.

With shares barely moving despite all this progress, Enbridge looks like an even better buy this month. It currently offers a 7.5% dividend which is expected to continue to grow as it increases its cash flow; Enbridge has increased its dividend for 29 consecutive years. This combination of yield and growth could give it the fuel to produce total returns in excess of 10% per year.

Declining despite its powerful growth profile

While most energy stocks have soared this year, Brookfield Renewable has moved in the opposite direction. Actions of the world leader renewable energy producer have declined by around 15% this year.

This liquidation doesn’t make much sense. The company reported strong fourth-quarter results in February, generating record funds from operations (FFO) of $1.1 billion, up 7% from the previous year. Although this figure fell short of its goal of generating annual FFO per share growth of more than 10%, the shortfall was largely due to timing. The company closed several deals later than expected during the fourth quarter. At the same time, more than half of its development projects entered service during the fourth quarter.

These headwinds will become favorable winds this year. Brookfield Renewable will be fully impacted by the $2 billion it agreed to spend on acquisitions last year. It will also take advantage of a full year of recently completed development projects.

Meanwhile, Brookfield still has plenty of growth ahead. It has a massive and growing backlog of development projects, including 24 gigawatts of late-stage projects that will add another $300 million in annual FFO when they come online. It also has plenty of financial flexibility to continue closing profitable deals. These catalysts lead the company to believe it can deliver double-digit FFO per share growth through at least 2028.

Given this year’s selloff, investors can buy this growth at a much lower price. They can also guarantee a much higher dividend yield (5.8% after a dividend increase of over 5% earlier this year). Adding it all up, Brookfield could produce powerful total returns in the future.

High total return potential

Enbridge and Brookfield Renewable are lagging their energy sector peers this year. But they have even greater upside potential, given the growth they both expect. Add in their high-yielding dividends, and these energy stocks could generate significant total returns in the years to come.

Should you invest $1,000 in Enbridge right now?

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Matt DiLallo holds positions in Brookfield Renewable, Brookfield Renewable Partners and Enbridge. The Motley Fool holds positions in and recommends Brookfield Renewable and Enbridge. The Motley Fool recommends Brookfield Renewable Partners and Dominion Energy. The Motley Fool has a disclosure policy.

2 Top Energy Stocks to Buy in April was originally published by The Motley Fool

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