Energy stocks started 2024 well. In the Energy Select Sector SPDR ETF, the average energy stock has gained almost 12.5%. That beat the S&P 500's 10.2% increase. Still, the sector offers appealing potential. Enbridge (NYSE: ENB) and Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) are top energy companies to purchase in April. Why they could boost total returns from here.
Getting better by deal The year has started slowly for Enbridge, with shares scarcely moving. Given the Canadian pipeline and utility giant's progress this year, that's puzzling. In early February, Enbridge posted strong fourth-quarter performance. Its adjusted EBITDA rose 6% last year, its 18th straight year meeting financial guidance. A month later, Enbridge extended its visible growth expectation through 2026, predicting 7% to 9% annual adjusted EBITDA growth.
The upcoming acquisition of three Dominion natural gas utilities will boost its growth. It called the $14 billion deal a "once-in-a-generation" opportunity. It concluded the first of three utility acquisitions last month and expects to close the other two by year's end.
Last month, the company got another breakthrough investment. It formed a cooperative venture to build a leading gas supply system from the Permian Basin to the Gulf Coast using its Rio Bravo pipeline project and two additional pipelines. The transaction will immediately boost earnings, diversify and increase cash flow, streamline its balance sheet, and boost growth.
Despite all this success, Enbridge shares are barely moving, making it a better purchase this month. Enbridge has grown its dividend for 29 years and presently pays 7.5%, which should rise as cash flow rises. That yield-growth mix may generate annual returns of above 10%.
Down despite strong growth While other energy companies have risen this year, Brookfield Renewable has fallen. The leading worldwide renewable energy producer's shares fell 15% this year.
That sell-off seems illogical. In February, the company announced record fourth-quarter FFO of $1.1 billion, up 7% from the previous year. That fell short of its 10%-plus annual FFO per share growth forecast, although time was the main factor. The fourth quarter saw several late trades. The fourth quarter saw almost half of its development projects launch.
This year, headwinds become tailwinds. Brookfield Renewable will fully benefit from its $2 billion acquisition investment last year. It will profit from a year of finished development projects.
Meanwhile, Brookfield will develop significantly. Its huge and increasing development project backlog includes 24 gigawatts of advanced-stage projects that will bring $300 million in yearly FFO when online. With its financial flexibility, it can keep making accretive deals. These drivers help the business expect double-digit FFO per share growth through 2028.
Investors can purchase growth cheaper after this year's sell-off. A more than 5% dividend rise earlier this year gives them a 5.8% dividend yield. Brookfield may generate high total returns in the future.
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