As of this winter, most of us can feel how expensive everything has become especially our utility costs. The real estate market isn’t booming, nor going downwards but houses and apartments which are very big, have no solar panels or thermal insulation or improved heating systems or any like this are on the market with big discounts.
There is a very clear answer to the „Why” and you can figure it out for yourself as you are sitting at home probably and maybe you have the same problem as those houses or you are feeling lucky with your low-cost apartment in a modern building.
I won’t answer the question of why is everything happening right now but I can give you a fairly good answer on how to profit from this inflationary segment with good renewable energy stocks.
For a more comprehensive guide on how to invest in dividend stocks, I recommend my book “Live Off Dividends“.
The industry has been growing briskly, quadrupling its electricity-generating capacity over the past decade. However, given increasing climate change concerns, the pace has quickened in recent years. It needs to accelerate to help rapidly decarbonize the economy.
3 Best Renewable Energy Stocks
I’m using the F.A.S.T. Graphs tool for my research mostly. It is a paid subscription but I found it to be very cheap for the information that it can give me. So the charts that you will see are mostly from this tool.
A few energy companies stand out above their peers as the best renewable energy stocks to buy.
Top three in my opinion:
NEE – NEXTERA ENERGY
BEP – BROOKFIELD RENEWABLE
CWEN – CLEARWAY ENERGY
What is a big surprise but also the best thing about those three is that they aren’t expensive stocks. I mean as of this moment they all have a reduced decent stock price although energy prices are up everywhere in the world. Everyone of each had its highest in 2021 somewhere.
1. What is NEE
Unbelievably how beautiful is the chart from NEE!
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, coal, and natural gas facilities.
To see how good a utility company can be I will use operating cash flow (How is Operating Cash Flow Calculated) to show you how efficient they are doing and most of its matches the stock price, if not, how big is the difference.
Let’s see what has been given to the investors in the last 10 years by NEE
Using the price to operating cashflow metric you can see that we are still under 25, and our stock price is slightly above the orange line which represents the margin of safety line where I like to buy always or below. The total annual return is 17.9% which is a very good number for this nonvolatile chart!
The dividend yield isn’t big but look at the numbers behind it.
2.03% Dividend Yield (Calculating the Dividend Yield) doesn’t seem to be that big but considering the fact that they have increased their yield for straight 28 years in a row and this increase was always at 10-11% yearly gives me a very good feeling about the company.
According to Yahoo.com they are slightly diluting their investors and issuing shares every year. Sad to see but only by a small percentage. The Payout Ratio (What is the Dividend Payout Ratio) stays always under 40% which is unseen by many good dividend-payer companies, that’s good!
NEE has outperformed the S&P500 on both the dividend and stock performance side according to https://fastgraphs.com/!
2. Brookfield Renewable Stocks
Brookfield Renewable(BEP) is a global leader in renewable energy!
Brookfield Renewable Partners L.P. owns a portfolio of renewable power generating facilities primarily in North America, Colombia, Brazil, Europe, India, and China. The company generates electricity through hydroelectric, wind, solar, distributed generation, pumped storage, cogeneration, and biomass sources.
BEP left us behind with a slow return but still…
Still not bad and positive income what gave us in the last 10 years. 9.4% total annual return, the price is at the normal industry Price to Operating Cash Flow ratio and very under the orange line. We have a better P/OCF ratio than 10 years before, definitely in the buy category.
This income stream is what makes everything better.
Comparing BEP to NEE, Brookfield has a much more likable 4.32% dividend yield. BEP has a dividend paying and increasing record of 15 years but increased only in the last 2 years in a row. The increase is a little bit volatile between 5-13% yearly.
Share buybacks can be a silent killer. If the company does not buy back shares but dilutes them then your investments are worth less over time. It is like a slice of cake where your slice will be smaller if the company dilutes its shareholders. BEP hasn’t issued shares in the last two years only before. I take it as a positive sign compared with NEE.
The payout ratio stays always under 45% and as you can imagine they outperformed the S&P500 on the dividend side but now on the capital appreciation.
„BEP’s full-year earnings have moved 344% higher within the past quarter. This signals that analyst sentiment is improving and the stock’s earnings outlook is more positive. This means that Brookfield Renewable Energy Partners is performing better than its sector in terms of year-to-date returns.” (nasdaq.com)
3. CWEN Stock
Clearway Energy(CWEN) is good retirement plan stock.
Clearway Energy, Inc. operates in the renewable energy business in the United States. It has approximately 5,000 net megawatts (MW) of installed wind and solar generation projects; and approximately 2,500 net MW of natural gas generation facilities. The company was formerly known as NRG Yield, Inc. and changed its name to Clearway Energy, Inc. in August 2018.
Why is clearway energy a good investment?
Clearway Energy Inc’s trailing 12-month revenue is $1.2 billion with a 45.3% profit margin. Year-over-year quarterly sales growth most recently was -3.1%. Analysts expect adjusted earnings to reach $4.000 per share for the current fiscal year.
CWEN does not have a long history. The company was founded in 2012 and has a „BB” S&P 500 Rating. Although it would be nice to have more than 10 years of data the company is 10 years old.
A little bit lower but more secure return on the investor’s investment is 7.3% yearly. Very flat price chart, more likely that it will stay that way in the future but that’s why I call it a retirement stock because it isn’t volatile and safe and pays a good dividend yield.
What about that dividend yield?
Clearway Energy has a 4.39% dividend yield. CWEN has a dividend-paying record of 8 years but increased only in the last 3 years in a row. The increase has been volatile between 5-21% yearly.
Overall the dividend is well secured with a payout ratio of 20%. This number was always under 25% in the last 8 years!
CWEN is a fairly young company so I will forgive them that they are issuing shares because this is what they need to grow significantly.
They outperformed the S&P500 on the dividend side but are now on the capital appreciation.
„Is Clearway Energy a good stock to buy?
Valuation metrics show that Clearway Energy, Inc. may be undervalued. Its Value Score of B indicates it would be a good pick for value investors.” (Zacks.com)
Should you invest in green energy stocks? – Closing Thoughts
There’s no expert consensus about whether energy stocks are a good buy or not. But it can be a safe begin to invest in any of these stocks that I just presented for you. Secondly, it is also good to keep in mind that energy stocks are less sensitive to interest rate changes.
A general rule is that long-term investors shouldn’t make major changes to their portfolio based on year-over-year fluctuations in the market. Focus on maintaining a diversified portfolio that holds stocks in a variety of sectors, including energy.
If you want my real personal opinion I would wait with NEE until the summer begins and then buy in. I have a very good feeling that after the winter season when everybody realizes, nobody has died because of the utility costs then the stock price will fall under tInvest in 3 Green Energy Stocks and Reduce Your Utility Costs!he margin of safety categories.
The smaller yield does not matter in my opinion because there I have a better overall yearly return.
Disclosure: I have no stock, option, or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.