We're in the early innings of what could be one of the greatest investment megatrends in history. Supercycles surrounding decarbonization and digitalization are powering tremendous needs for computing power and clean energy. Companies will need to invest trillions of dollars in the years ahead to support their digitalization and decarbonization initiatives.
Given the massive size of these trends, there will likely be many winners over the long term. However, a couple of companies stand out for their robust growth potential related to these megatrends, including Brookfield Infrastructure (BIPC -2.20%) (BIP -1.03%) and Constellation Energy (CEG -0.92%). Here's why they're brilliant growth stocks to buy right now.
Playing both sides of the trend
Brookfield Infrastructure has a globally diversified platform of utilities, midstream, transportation, and data infrastructure businesses. The company estimates that about 60% of its business is benefiting from the digitalization trend.
Its data infrastructure platform is the most obvious beneficiary. Brookfield has built a global data center platform that's growing briskly due to the surging need for computing power. On top of that, the company's telecom towers and fiber assets are capitalizing on the ever-increasing need for data transmission infrastructure. Brookfield is also investing roughly half the capital required to fund the development of two semiconductor fabrication facilities in the U.S.
Meanwhile, the company's utilities and midstream assets are benefiting from growing power demand, especially lower-carbon natural gas. That's opening the doors to new expansion opportunities.
Finally, Brookfield sees a robust opportunity to continue acquiring infrastructure assets worldwide. Companies need capital to invest in digitalization and decarbonization, which is supplying Brookfield with more opportunities to be a provider of capital. The company's current investment pipeline is as big as it has been in two years and continues expanding.
These factors drive Brookfield Infrastructure's view that it should be able to grow its funds from operations (FFO) per share at a more than 10% annual rate in the future. On top of that, Brookfield pays a high-yielding dividend (around 4%) that should grow by 5% to 9% per year. That combination of earnings and income growth sets Brookfield up to potentially produce annual total returns in the mid-teens.
Supercharged growth potential
Constellation Energy is the country's largest clean power producer, mainly due to its leading nuclear power fleet. It also has a growing renewable energy portfolio.
The power producer has a lot of visibility into its future growth thanks to the power purchase agreements it signed with utilities and corporate customers. They help power the company's robust growth outlook.
Constellation Energy expects to deliver more than 10% compound annual earnings per share growth through 2028. It also aims to increase its dividend by about 10% annually, after boosting its payout by 25% earlier this year. Those growth drivers should enable it to produce strong total returns over the next few years.
Constellation's outlook doesn't include the potential for a resurgence in nuclear energy. The company recently signed a deal with tech giant Microsoft to restart a nuclear-generating unit, which shut down in 2019 due to economic reasons. Microsoft will buy all the power the plant produces at a significantly higher price than other power sources due to its immense need for lower-carbon energy. That plant should come back online in 2028, providing further earnings growth potential for Constellation Energy.
The power company is also looking into other ways to capitalize on surging electricity demand, including potentially building small modular reactors and investing in other nuclear energy projects. These catalysts could further extend and enhance its long-term growth prospects.
Smart growth stocks
The world will need a lot more computing power and lower carbon energy in the coming years. That bodes well for the future growth prospects of Brookfield Infrastructure and Constellation Energy. The companies already expect to grow their earnings at a double-digit rate for the next several years, with lots more growth potential beyond that. It makes them look like smart growth stocks to buy for the long haul right now.
