Investing $250,000 in This Basket of Dividend Stocks Should Buy You 1 Whole Bitcoin by 2026
The crypto sell-off intensified over the weekend, as Bitcoin (CRYPTO: BTC) fell below $35,000 and Ethereum (CRYPTO: ETH) fell close to $2,300 on Saturday. Both top cryptos are now down 50% or more from all-time highs set on Nov. 10.
Investors looking to free-roll a whole Bitcoin off dividends alone can do so by investing $250,000 into equal parts of Brookfield Renewable Corporation (NYSE: BEPC) (NYSE: BEP), Stag Industrial (NYSE: STAG), and NRG Energy (NYSE: NRG). Even if you don't have a cool quarter-million dollars lying around, all three companies have solid fundamentals and over 3.5% dividend yields. Here's what makes each
The perfect starter renewable-energy stock
Brookfield's investment proposition is simple. It invests in and operates a portfolio of high-quality projects and then passes along its earnings on those projects to shareholders through a stable and growing dividend.
Renewable energy has vastly underperformed oil and gas since early 2021. Part of that is due to a surge in investment leading up to 2021, both from existing players and oil and gas companies divesting away from fossil fuels to prepare for an accelerated energy transition. It's also worth mentioning that renewable equity valuations arguably got ahead of themselves in 2020. For example, the Invesco Solar ETF (NYSEMKT: TAN) rose more than 230% in 2020.
Rising interest rates threw a wet blanket on capital-intensive renewable projects that depend on debt. Inflation and supply chain issues add cost pressure and hassle to the industry, too. There are a lot of short-term headwinds ramming into the renewable industry now.
Investors who have been waiting to invest in renewables are in luck. Opening a starter position in Brookfield Renewable provides one of the easiest ways to expose your portfolio to the general growth of the industry instead of betting on a single technology or industrial company. What's more, Brookfield's 3.7% dividend yield offers
A REIT focused on the industrial sector
Stag manages the risk in its portfolio of 517 industrial properties through diversification of its customer base. No tenant accounts for more than 4% of its annualized base rental (ABR) revenue, and its top 20 tenants account for less than 20% of its ABR. For a flavor of its customer base, Amazon is its largest single customer, representing 3.8% of ABR, with FedEx and various logistics accounting for around 1%, respectively. Whichever way you look at it, this isn't a REIT that will get into significant difficulty if one or two high-profile customers get into trouble.
One of the key revenue drivers for the REIT comes from its exposure to growth from e-commerce. Around 40% of its portfolio "handles e-commerce activity," according to the company. Given the acceleration in e-commerce activity and investment created by the pandemic and social isolation measures, Stag is likely to see its tenants looking to expand.
Around 97.5% of its debt is fixed-rate, with only 15% of it maturing through 2023. As such, Stag should handle a potential rise in interest rates with ease. However, it could restrain its future growth, and rising rates will make its dividend yield relatively less attractive. Still, interest rates aren't going to 3.5% anytime soon, and Stag offers a decent way to play growth in the U.S. industrial sector.
Hit the gas and power your passive income
Since NRG Energy, an independent power producer, excels at generating free cash flow (FCF), investors can feel confident that future dividend increases aren't going to jeopardize the company's financial health. Over the past five years, for example, NRG Energy has averaged annual FCF per share of $2.42 -- a period during which it returned an average of $0.36 per share to investors through its dividend. And management seems sure that the company will continue printing the green stuff. During an investor presentation last June, Mauricio Gutierrez, the company's president and CEO, lauded the company as "a unique consumer business that can deliver 15% to 20% annual growth in free cash flow per share over the next five years."
Another consideration for dividend-paying companies, besides FCF, is their balance sheets. Generating strong cash flow is great, but if the cash flow is merely going toward servicing a company's debt, it doesn't bode well for instilling faith in the company's ability to return cash to shareholders through the dividend. In the case of NRG Energy, the company's debt-to-equity ratio of 2 may raise a red flag for some; however, management is sensitive to the company's balance sheet, and on the
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