Clean energy, renewable energy, alternative energy, whatever you call it, it’s a fascinating market niche. Shunning fossil fuel energy sources like coal and oil, and focusing on at least climate change-friendly, clean-burning fuels like natural gas or uranium, there’s a lot going on in the alternative energy space.
But there’s also a vast array of renewable energy plays as well, such as solar power and wind. These green energy plays are truly optimal from an environmental standpoint, but have historically had high costs relative to oil prices, or have only worked best in low-population areas where energy storage and transmission have been a problem.
That’s changing rapidly, however, making for a dynamic growth space likely to continue for years to come.
Best Renewable Energy Stock #1: First Solar (FSLR)
One of the world’s leaders in manufacturing solar cells and other photovoltaic solar energy solutions, First Solar is a major player in the world of renewable energy, making it the top renewable energy stock and best among the solar companies right now.
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The company manufactures modules that convert sunlight into electricity. Customers range from utility companies to independent power producers, as well as commercial companies as well.
The declining costs of solar panels in recent years have made it easier for the company to sell its clean energy products, and has helped the company eke out a small profit in the last year. Over the past year, shares are down about 7 percent.
But with First Solar’s strong balance sheet, which has nearly $900 million in cash after all debt, as well as insider ownership of over 28 percent of shares, this is one company that’s well positioned to take advantage of the improvements in solar cells for the foreseeable future.
Best Renewable Energy Stock #2: Fuel Cell (FCEL)
One of the larger companies in the penny stock world, FuelCell Energy (FCEL) has a market cap of over $550 million. The company is a manufacturer and seller of stationary fuel cell power plants for producing and storing electricity.
Fuel cells allow for distributed power generation, utility grid support, and on-site power for places that need it. The company’s products serve utilities, industrial locations, as well as educational, healthcare, and data center facilities.
Given the difficulty of improving the existing power grid, the company provides a great solution to customers with its small-scale solutions.
While shares are considerably down over the past five years, the past year has seen a massive upswing in shares. The share price has risen from a low of $0.13 to over $2.36, nearly a ten-fold gain. That’s the kind of massive returns possible with penny stocks, and with FuelCell’s revenue growth up over 104 percent in the past year, it’s likely to continue climbing higher.
Best Renewable Energy Stock #3: Brookfield Renewable (BEP)
Here’s a truly international play. Based out of Bermuda, Brookfield Renewable is a partnership that generates 19,000 megawatts of electricity from clean energy products including wind power, solar, biomass and hydroelectric sources across North America, Brazil, Europe, India and China.
Brookfield Renewable’s partnership structure is a bit different than traditional utilities, but it means that the company has to pay out the majority of its earnings to the holders of shares.
That’s enough to provide investors with a 4.4 percent dividend yield, making for a reasonably high dividend stock. The company has a policy of looking to raise its dividend payout ratio by at least 5 percent annually, so as a dividend growth play, this company looks truly impressive for long-term investors, especially those interested in a one-play renewable energy strategy.
The stock price is also up 36 percent in the past year, showing that capital gains can occur when investing in renewable energy projects as well. Despite that overall return, shares are still well below highs set back before the market meltdown in March, so there’s room for further capital gains on this unique, international investment in the utility space.
Best Renewable Energy Stock #4: Broadwind Inc. (BWEN)
This manufacturer of wind turbines, which includes both on land and offshore wind, is a big player in the space with a small, beaten-down market cap. Although wind power is one of the cleanest sources of power in the energy industry, some don’t appreciate the sight of windmills.
What’s more, the amount of wind where a wind turbine can go needs to be at a Goldilocks mix of not too fast nor too slow. That limits this source of wind energy, but it’s still a great one to have.
Broadwind is a one-stop shop offering fabrication, gearing, and solutions. And besides its work on wind turbines, it has some diversification in the natural gas turbine market. Although the company is nearly a micro-cap stock, shares are up over 130 percent in the past year thanks to the value of wind as an investment.
The stock still trades at a nice discount to a variety of key metrics as well. The company just missed hitting profitability last year, but with revenues up 16 percent in the same timeframe, investors are already starting to look for a profitable year ahead
Best Renewable Energy Stock #5: NextEra Energy (NEE)
NextEra Energy, formerly FPL for Florida Power and Light, is an electric utility that serves 10 million customers on the coasts of Florida, one of the fastest growing regions in the nation. That means this utility play will likely see above average growth for years to come as Florida’s population increases thanks to a favorable climate, job opportunities, and the state’s lack of an income tax.
More importantly, the utility has been a key player in the renewable energy market with massive investments in solar and wind farms in addition to natural-gas plans. In fact, the utility is the largest investor in the space at the moment.
Unsurprisingly, the utility has done better than stocks in the past year, with a 24 percent rally against a 6 percent rally for the market as a whole. And with a 13 percent increase in revenue in the past year, the utility still has some long-term gains ahead, in every metric from customers to cash flow.
Currently, NextEra Energy shares yield $5.60 annually, up from $5.15 the year before, for a 2.2 percent dividend yield. That makes for a great energy company with a growing renewable power side to it as well.
How Fast is Renewable Energy Growing?
The renewable energy sector has been growing at a rapid pace for years, thanks in part to increased demand, as well as lower costs for manufacturing renewable energy assets such as solar panels. One recent estimate is that renewable energy doubled from 2000 to 2018, and overall accounts for about 17 percent of all energy use in the United States.
That means alternative energy stocks, focused on anything from utilities to electric vehicles, should be a hot market for years to come. And renewable energy sources don’t require the vast expenses for exploration compared to traditional fossil fuels like oil.
How to Find Good Renewable Energy Investments?
There are plenty of good renewable sources, so, first, avoid fossil fuel heavy plays like oil companies. While they have been making forays into alternative energies, they’re starting with spaces like natural gas. They’re not doing the most dynamic, cutting-edge work that can offer the best returns in the space. Look for companies with a proven technology that are headed to profitability, even if they aren’t there yet.
Finally, consider renewable energy ETFs for diversification. While it may contain a number of underperforming renewable energy companies, the overall returns will be boosted by owning the best-returning names in the space as well.
Is Renewable Energy a Good Investment?
The renewable energy industry is an area showing real and sustained growth. And with the costs coming down to the point where renewable energy is on par with fossil fuels, renewable energy stocks are starting to look like a solid investment opportunity in the years ahead.
New technologies will likely only drive costs down further, making profitability in the space far more likely as a whole. That’s why clean energy stocks look like a reasonable long-term investment right now.
Which Countries Invest the Most in Renewable Energy?
China, the United States, and Japan are the top three leaders for investments in renewable energy. Many European countries are now deriving the majority of their power production from renewable resources as well, and have completely phased out some fuels such as coal. But renewable energy stocks can be found in any market, so there are plenty of opportunities.