HELOC For Consumption vs Investment

It seems every other day one can open a national newspaper these days and read about someone decrying the state of the average Canadian. The experts tell us we are so far in debt that we may never climb out and that this should be more than enough to scare us straight. It likely won’t be of course, because we are addicted to debt. “Live for the moment because you deserve it!” Isn’t that what targeted advertising campaigns preach to us endlessly? The fact is that not all debt is created equal, and I actually wish that I was 151% of my yearly income in debt, (I think I am roughly 170% in debt… but cut me some slack, I’m in my mid-twenties and own a house) as long as it was the right kind of debt.

Join The Debt Consolidation Party!

I’m constantly amazed by the social acceptance that goes along with consumer debt these days. People have taken to unlocking the equity in their house at unprecedented rates. The mechanism that allows us to do this so easily is known as a Home Equity Line of Credit or HELOC. Every big bank makes sure to feature this borrowing vehicle prominently in their ads because it is a fantastic deal for them. They get to lend money, and it is backed up by the solid value of a house; furthermore, the house is already an asset that the bank is making money on since you likely borrowed the original capital to purchase it from the very same bank. The bank made money on you paying it off the first time, and now they will make money on the same asset yet again!

HELOCs seem to be the magic elixir that is prescribed to fix all financial ills these days. Pesky credit card debt? A little HELOC for that. Stubborn car loans at a high interest rate that just won’t die. Mix a little HELOC every night before bed. It has not only become acceptable to use a HELOC to fund lifestyle inflation, it is actually routinely called “expert advice” and our nice financially-savvy term for it is “consolidating your debt at the lowest interest rate.” While this is not technically bad advice (once you have the debt, it is actually quite logical), but the fact that it is so widespread actually encourages the original sort of behaviour. Instead, maybe we should focus on not getting into that position in the first place a little more! Did you really need two new vehicles? Maybe you didn’t need that large detached house that you’re now so quick to borrow against (along with the crippling payments, and mounds of interest that went with it)? Continue reading HELOC For Consumption vs Investment

Canadian Dividend Stocks: Brookfield Renewable

There are a number of Canadian companies purporting to be sustainable right now, and many of these companies even pay dividends. Canadian dividend stocks have been rising to prominence in recent years as Canada receives attention for weathering the aftermath of the 2008 financial crisis. Many investors are looking to Canada as a source of opportunity.

And, of Canadians are already interested in what’s available to them in their home country. If you want to invest according to your values, and find sustainable companies — or at least companies that are a little more eco-friendly than their competitors — there are plenty of choices. One of these possibilities is Brookfield Renewable Energy Partners.

What Does Brookfield Partners Do?

Brookfield Partners (TSX: BEP.UN) is one of the largest pure-play renewable energy platforms that is publicly traded — in the world. The company concentrates largely on hydro power, and has a presence in 10 power markets and 67 river systems throughout Canada, Brazil, and the United States. Brookfield also includes wind energy. The company owns the Prince Wind Farm, as well as two other wind farms in Canada. Brookfield is building two wind farms in the United States, and recently acquired two wind farms in Canada.

Brookfield’s sustainability credentials include:

  • EcoLogo Program criteria met at 21 hydroelectric facilities
  • Low Impact Hydropower Institute certification at 43 facilities
  • ISO Accreditation
  • Member of the Canadian Electricity Association

Brookfield Renewable Energy Partners L.P. was launched relatively recently, combining the Brookfield Renewable Power Fund with the assets of Brookfield Renewable Power Inc. However, the company claims to have more than 100 years of experience in the energy field. The company just filed a 20-F registration statement with the SEC in the United States, in the hopes that it will be able to widen the investor base for the L.P. units. The company appears to be making efforts to increase its appeal in the United States, and its efforts as an international renewable energy player.

What about the Brookfield Renewable Energy Dividend?

BEP.UN recently boosted its annual dividend payout to 1.38 annually, paid quarterly at 34.5 cents per share. Brookfield offers a reinvestment plan (DRIP) as well. This means that you can get more shares by automatically reinvesting your dividend distribution without paying commissions. (If you’re in the U.S., though, there isn’t a DRIP option available.)

The yield remains at around five per cent. The market cap is 2,874.5 million as of this writing. There is a forward P/E of 53.82. Some of our readers had nicer things to say about BEP.UN than about TransAlta, probably because Brookfield appears to be trying to grow at a reasonable pace, while TransAlta is having some legal troubles. The dividend doesn’t seem likely to be cut anytime soon, and there are plenty of opportunities for growth for the company. However, as with all investments, it’s a good idea to do your own research, and consider how Brookfield might fit in with your portfolio. Utility companies, though, have traditionally been decent dividend payers, and with Brookfield in the $27 to $28 per share range lately, it might not be a bad deal.

What do you think about Brookfield Renewable?