The debate over renewable energy (i.e., clean energy) versus nonrenewable energy derived from fossil fuels was always going to come down to dollars and cents. Since 2016, things haven’t been easy for renewable energy companies. As the United States pushed towards energy independence, the Trump administration imposed tariffs on the industrial segments. The sector was subject to less favorable policies by electricity regulators. Plus, competing energy sources like coal received more help.
But a funny thing happened over the past four years. Renewable energy companies continued to grow. This is continuing a pattern that renewable sources of energy are becoming cost-competitive for businesses. And that is increasing demand.
One of the best parts of this sector for investors is that there are many ways to play the sector. In addition to solar and wind, hydrogen stocks are becoming an intriguing way to invest in renewable energy.
So rather than looking at this election as a choice between bad and good, investors should really be viewing it as a case of “good or better.” Because no matter who wins the election, clean energy stocks will continue to grow.
Quick Links
- Brookfield Renewable Partners
- NextEra Energy
- Plug Power
- Bloom Energy
- SolarEdge Technologies
- Hannon Armstrong
- Atlantica Sustainable Infrastructure
#1 - Brookfield Renewable Partners (NYSE:BEP)
The first company we’ll take a look at is Brookfield Renewable Partners (NYSE:BEP). Brookfield Renewable Partners is a global leader in hydroelectric power. The company has a worldwide network of 5,300 power generation facilities that accounts for approximately 65% of its current capacity.
However, the company is in the process of pivoting into the solar field. In fact, Brookfield is confident it can derive the majority of its production capacity from solar within the next 10 years. In the company’s most recent earnings report in August, CEO Sachin Shah noted that its solar business continues to grow with 3,000 megawatts of solar in operations with an additional nearly 10,000 megawatts under development. And this is occurring in an environment where the cost to install solar has dropped by over 75% in the last five years.
And the company has a strong balance sheet with nearly $3.5 billion in available liquidity. Plus, investors in BEP stock can get a modest dividend that pays out quarterly. Currently, the dividend yield sits at 3.29%.
About Brookfield Renewable Partners
Brookfield Renewable Partners L.P. owns a portfolio of renewable power generating facilities primarily in North America, Colombia, and Brazil. The company generates electricity through hydroelectric, wind, solar, distributed generation, and pumped storage, as well as renewable natural gas, carbon capture and storage, recycling, cogeneration biomass, nuclear services, and power transformation.
Read More - Current Price
- $24.98
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $31.78 (27.2% Upside)
#2 - NextEra Energy (NYSE:NEE)
Another big name in renewable energy is NextEra Energy (NYSE:NEE). NextEra is not a pure-play in renewable energy. It is one of the nation’s largest electric utilities. However, it’s also a global leader in both wind and solar. The company has a healthy stream of predictable and stable revenue from rates and fee-based contracts.
In the company’s most recent earnings report, NextEra announced a record number of energy generation projects. And the company’s 15,000-megawatt backlog is now bigger than its existing renewables portfolio.
NextEra is also an exceptional choice for investors who want a strong balance sheet. NextEra posted sequential earnings per share (EPS) gain of over 11% in its October earnings report. This continues a pattern that has seen 2020 EPS grow by over 10% on a year-over-year basis.
After being flat for the first half of the year, NEE stock is up 23%. The company pays out one of the more reliable dividends in the industry. In fact, the company just increased its dividend in October and has a dividend yield of 1.9%.
About NextEra Energy
NextEra Energy, Inc, through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear,natural gas, and other clean energy. It also develops, constructs, and operates long-term contracted assets that consists of clean energy solutions, such as renewable generation facilities, battery storage projects, and electric transmission facilities; sells energy commodities; and owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets.
Read More - Current Price
- $76.87
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $86.54 (12.6% Upside)
#3 - Plug Power (NASDAQ:PLUG)
If you’re willing to engage in more speculation, it may be time to consider adding hydrogen stocks to your portfolio. Hydrogen technology has tried to gain traction with investors for 20 years. But the cost and complexity have hurt its viability. But that appears to be changing. And right now, Plug Power (NASDAQ:PLUG) is considered by many to be one of the best choices.
Plug Power manufactures fuel cells that are used in the forklifts of company’s like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT). What is beginning to excite investors is that it recently acquired a liquid hydrogen provider that makes electrolyzers. This will give Plug Power the ability to realize the profit margin on the hydrogen that these companies use.
Analysts are taking notice of PLUG stock. Of the eight analysts that cover the stock, seven give the stock a buy rating. And the research firm S&P Global Market Intelligence believes that Plug Power will post a profit in 2023.
About Plug Power
Plug Power Inc develops hydrogen and fuel cell product solutions in North America, Europe, Asia, and internationally. The company offers GenDrive, a hydrogen-fueled proton exchange membrane (PEM) fuel cell system that provides power to material handling electric vehicles; GenSure, a stationary fuel cell solution that offers modular PEM fuel cell power to support the backup and grid-support power requirements of the telecommunications, transportation, and utility sectors; ProGen, a fuel cell stack and engine technology used in mobility and stationary fuel cell systems, and as engines in electric delivery vans; GenFuel, a liquid hydrogen fueling delivery, generation, storage, and dispensing system; GenCare, an ongoing Internet of Things-based maintenance and on-site service program for GenDrive fuel cell systems, GenSure fuel cell systems, GenFuel hydrogen storage and dispensing products, and ProGen fuel cell engines; and GenKey, an integrated turn-key solution for transitioning to fuel cell power.
Read More - Current Price
- $1.92
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 11 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $4.52 (135.5% Upside)
#4 - Bloom Energy (NYSE:BE)
Another speculative play in the hydrogen sector is Bloom Energy (NYSE:BE). Bloom’s core business is hydrogen fuel cells that convert natural gas or biogas into electricity. Typically, the electrochemical process requires combustion, but Bloom’s process does not, which means about 50% to 60% less CO2 output. The company also claims its fuel cells have higher fuel efficiency.
Bloom Energy is attempting to tap hydrogen’s potential for industrial applications such as the maritime industry. Bloom is also focusing on developing its own carbon capture system. If successful, it would effectively take its CO2 output to zero since carbon would not leave the generator.
The company is not without its risks. Bloom has posted nearly 60% more revenue than its three major rivals combined over the last 12 months. However, the company is still not profitable. And its path to profit is being obstructed by interest expenses and high operational costs, including in the areas of marketing and research and development (R&D).
Nevertheless, the stock is up nearly 100% for the year. And as recently as early October, BE stock was up over 200%.
About Bloom Energy
Bloom Energy Corporation designs, manufactures, sells, and installs solid-oxide fuel cell systems for on-site power generation in the United States and internationally. The company offers Bloom Energy Server, a solid oxide technology that converts fuel, such as natural gas, biogas, hydrogen, or a blend of these fuels into electricity through an electrochemical process without combustion.
Read More - Current Price
- $24.79
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 9 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $17.55 (29.2% Downside)
#5 - SolarEdge Technologies (NASDAQ:SEDG)
Turning our attention to solar energy, investors should pay attention to SolarEdge Technologies (NASDAQ:SEDG). SolarEdge is an Israeli company that produces power optimizers, solar inverters, and monitoring systems to make residential and commercial solar products more efficient. The company has seen its U.S. market share of the residential solar market jump from 5% in 2013 to 61% in 2020.
Think of SolarEdge in a similar way as some of the semiconductor stocks that are a part of the 5G revolution. Just as those stocks are climbing because their products are essential to the global network's build-out, that’s the idea behind SolarEdge. Solar panels need to become more powerful and efficient. And SolarEdge is providing the technology to make that happen.
SEDG stock is up over 166% for the year. The company is getting ready to report earnings in early November. At that time, analysts will be looking for confirmation that SolarEdge is still on target for 27.51% revenue growth and 36.53% earnings growth in 2021.
About SolarEdge Technologies
SolarEdge Technologies, Inc, together with its subsidiaries, designs, develops, manufactures, and sells direct current (DC) optimized inverter systems for solar photovoltaic (PV) installations in the United States, Germany, the Netherlands, Italy, rest of Europe, and internationally. It operates in two segments, Solar and Energy Storage.
Read More - Current Price
- $10.87
- Consensus Rating
- Reduce
- Ratings Breakdown
- 2 Buy Ratings, 19 Hold Ratings, 8 Sell Ratings.
- Consensus Price Target
- $22.79 (109.7% Upside)
#6 - Hannon Armstrong (NYSE:HASI)
A different way to invest in renewable energy stocks is to invest in companies that make renewable energy investments. That brings us to Hannon Armstrong (NYSE:HASI). According to the company’s website, the company “will earn better risk-adjusted returns by investing on the right side of the climate change line.”
How they do, that is what should interest investors. Hannon has the flexibility to invest funds in different ways. The company’s investments take different forms, including equity, joint ventures, land ownership, lending, or other financing transactions. This allows them to move dollars around to help investors get the best return for the risk. The company also generates revenue through ongoing fees on a variety of projects.
HASI stock is up over 36% in 2020 and 44% in the last 12 months. The company also pays a nice dividend with a yield that currently sits at 3.19%. Of the seven analysts that offer ratings on HASI stock, five give the company a buy rating.
About Hannon Armstrong Sustainable Infrastructure Capital
Hannon Armstrong Sustainable Infrastructure Capital, Inc, through its subsidiaries, engages in the investment in energy efficiency, renewable energy, and sustainable infrastructure markets in the United States. The company's portfolio includes equity investments, commercial and government receivables, real estate, and debt securities.
Read More - Current Price
- $28.04
- Consensus Rating
- Buy
- Ratings Breakdown
- 11 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $39.83 (42.1% Upside)
#7 - Atlantica Sustainable Infrastructure (NASDAQ:AY)
Atlantica Sustainable Infrastructure (NASDAQ:AY) is another way to invest in renewable energy infrastructure. However, Atlantica is specifically focused on the areas of solar and wind. And these are the two sectors that have been growing (and becoming more cost-efficient) even as a Republican has occupied the White House. This is key to Atlantica’s business model because it benefits from solar and wind cost efficiency.
Atlantica benefits from the steady cash flow from its investment in utility-scale wind and solar energy power plants. This lets it fund new projects while allowing the company to reward shareholders with a stable and growing dividend. The current yield is 5.76%.
Wind and solar are growing in popularity. And that means that Atlantica has a business model that doesn’t depend on a specific election result.
In the company’s most recent earnings report, the company reported having almost $500 million available for growth and several hundred million dollars available to the company through its revolving credit facility.
About Atlantica Sustainable Infrastructure
Atlantica Sustainable Infrastructure plc owns, manages, and invests in renewable energy, storage, natural gas and heat, electric transmission lines, and water assets in North America, South America, Europe, the Middle East, and Africa. The company was formerly known as Atlantica Yield plc and changed its name to Atlantica Sustainable Infrastructure plc in May 2020.
Read More - Current Price
- $22.15
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $22.20 (0.2% Upside)
Investing is about knowing where to put your money to capture the trends that are likely to influence investing for the next 10 or 20 years. And no bigger sector will dominate the next 10 years than renewable energy.
According to the U.S. Energy Information Administration, 2019 marked the first year since 1885 (that’s 1885, not 1985) that domestic annual energy consumption from renewable energy sources surpassed coal consumption.
But wait? Don’t we hear about how this is an election about coal versus renewables? We are, but that’s a false dichotomy. The reality is that the renewable energy movement is growing because technology is becoming cost-efficient. And this is a trend that will continue regardless of the election result.
At this time, the most widely used applications are in the electric power sector, primarily from wind and hydroelectric power. However, solar is coming on strong, and there is evidence that hydrogen fuel cells may be getting ready to be a significant player.
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