Renewable space energy has become an extremely popular sector among investors recently. Indeed, as shown below, the iShares S&P Global Clean Energy Index ETF (ICLN) has outperformed the United States Oil Fund (USO) in the past five years. While ICLN has risen by more than 100%, USO has dropped by more than 80%. This is mostly because the world is quickly transitioning to clean energy. Below, you will find a detailed analysis, and we will look at the five clean energy stocks to invest in and hold.
Clean energy vs. oil and gas companies
Started in 2007, Sunrun is one of the biggest clean energy companies in the United States, with a market cap of more than $6.7 billion and annual revenue of more than $858 million. The company provides its services to more than 233,000 customers in the US. It also generates more than 1,600 megawatts of power every year.
Sunrun works by installing solar panels and infrastructure to homeowners and then receives payments from its customers. The customers pay zero to nothing upfront and then pay a small amount per month. They can also select to have a full lease of up to 25 years or full purchase.
Over the years, Sunrun had grown its revenue from $54 million in 2013 to more than $858 million in 2019. In the same period, it has moved from a $1.2 million loss to a net profit of more than $26 million.
There are several reasons why investing in Sunrun makes sense. First, as evidenced by these numbers, the company is in a strong growth phase. As more people, especially millennials, get attracted to clean energy, the business will only grow.
Second, in case Joe Biden wins the upcoming election, the firm will benefit from his commitment to clean energy. For example, he has committed to spending more than $2 trillion in clean energy in the next few years.
Third, the company has an easy business model that assures it of little churn.
NextEra Energy (NEE)
NextEra Energy (NEE) made history recently when it passed ExxonMobil to become the biggest energy company in the United States. The company is worth more than $145 billion and has an annual revenue of more than $19 billion. It has more than $3.8 billion in annual profit. The firm has achieved this both organically and through mergers and acquisitions.
In 2019, it acquired Gulf Power from the Southern Company in a $6.75 billion transaction. It is said to be planning a takeover of Duke Energy, a company worth more than $65 billion.
For starters, NextEra is a clean power utility that focuses on solar and wind energy. It generates more than 45,500 megawatts per year and serves more than 5 million customers.
You should invest in NextEra because of its scale as the biggest power company in the UK. This has seen it attract significant investments by funds that are focused on Environmental, Social, and Governance (ESG) issues. Second, it is also a major dividend payer with a forward yield of about 1.89%. However, the biggest challenge is that it has a significant debt of more than $37 billion.
Brookfield Renewable Partners (BEP)
Brookfield Renewable Partners is a major clean energy company that is part of the Brookfield Asset Management company. The company invests primarily in clean energy projects in North America, South America, Europe, and Asia. It has a market cap of more than $16 billion, annual revenue of more than $2.8 billion. The firm generates a net income of more than $270 million. Most importantly, it has a dividend yield of ~3.19%.
Brookfield Renewable Partners generates most of its income from hydroelectric power, with the rest coming from wind, solar, distributed generation, and storage.
There are many benefits to investing in Brookfield. First, the firm has a big total addressable market. As shown below, many of its markets still have a long path towards achieving their net-zero carbon emissions.
Brookfield has a large TAM.
Second, the company operates in the energy industries that are cheap to produce. Indeed, in the past decades, the amount of money needed to produce solar and wind energy has been in a steady decline. This is a good thing for its margin. Third, hydropower, which is its biggest industry, has a perpetual lifetime, requiring only component replacement. This means that the company will continue earning money from this segment and putting it into other fast-growing industries. Finally, Brookfield’s dividend is strong and stable.
Atlantica Sustainable Infrastructure (AY)
Atlantica Sustainable Infrastructure is a Nasdaq-listed London-based company that owns renewable power plants around the world. The firm owns 25 assets, which produce 1,496 megawatts of renewable energy. It also focuses on natural gas and more than 1,166 miles of electric transmission lines.
The firm has a market value of more than $2.7 billion. In terms of income, AY has grown its annual revenue from $107 million in 2012 to more than $1 billion. Its net income has grown to more than $62 million.
There are several reasons why you should consider investing in AY. First, its energy sources are highly-diversified, making it a highly dependable company. Second, its infrastructure projects are relatively young and have a long life ahead of them. Third, it enters into long-term contracts, which helps it have predictable income. Fourth, AY has a highly-diversified global presence, with operations in the United States, Canada, Peru, and South Africa, among other places. Finally, it has a high dividend yield of about 5.67%.
First Solar (FSLR)
First Solar is the biggest solar power manufacturing company in the United States, with a more than $9.8 billion market value. The company designs, manufactures, and sells solar power systems. It operates its business in two segments, modules and segments. In modules, it designs and manufactures solar modules for third parties.
In its systems, it provides power plant solutions like project development, engineering, and O&M services. The two segments generate almost similar sales. In 2019, they generated $1.46 billion and $1.6 billion, respectively.
The main benefit of investing in the company is that it will grow as the overall solar energy industry grows. This is set to happen since many countries and American states are rushing to reduce their carbon emissions.
With the issues of climate change and ESG taking center stage around the world, companies in the industry are bound to benefit. While the five firms mentioned here are the most promising, there are other firms you can invest in. For example, while Tesla is an electric car-maker, it is also a leading solar energy company through its SolarCity acquisition.