Updated: Jan 26
The global renewal energy industry is rising, with many nations aiming to go as green as possible in their energy supply. However, should you put your money in renewable energy firms as an investor? Which green energy companies are worth watching today? This article answers these questions and more.
Why invest in green energy stock?
Renewable energy is going to play a crucial role in the energy transition to a low-emission society. As such, it is an excellent industry to invest in. This shift is a huge undertaking, as the global economy's decarbonization may require up to $100 trillion in the next three decades.
Renewable energy, including wind, solar, and hydropower, is responsible for about 25 percent of the total energy generated globally. However, the growth rate is an important metric. The renewable energy subsector has been growing at about 8 percent annually over the last decade. From all indications, the growth rate is set to increase.
Many companies are trying to reduce their carbon footprint by eliminating emissions-producing power sources from their operations. Others are buying only power from renewable sources from their utility companies.
Some companies try to go green to boost their credibility as environmentally conscious businesses. However, renewable energy often costs less, allowing businesses to reduce their energy expenses.
The falling costs of solar panels, wind turbines, and battery energy storage systems have encouraged the proliferation of renewable energy projects.
In addition, many governments are actively taking steps to decarbonize through legislation. They also use incentives to lure energy producers to renewable energy. For example, the US Senate passed a $1.2 trillion infrastructural package last year that includes the provision of billions of dollars to seed investments in clean energy.
All of these combine to produce a vibrant market for investments.
Top green energy stocks to watch
While many companies are into renewable energy, it is essential to pick the best of the best when making investments. This is to prevent getting in bed with businesses that cannot deliver. Below are the top renewable energy stock worth watching.
While not a household name, this company is the world's largest wind and solar energy producer. It has production facilities in Florida and sells power through PPAs to other utility companies and also directly to consumers.
You should watch NextEra Energy closely as it has yielded about 700 percent in returns in the last decade. The company has enjoyed above-average growth, increasing its dividend yearly for more than a quarter of a century. It had a market cap of $169.8 billion as of April 7th.
Brookfield is one of the global leaders in hydroelectric power production. Hydropower makes up more than 62 percent of its energy portfolio in 2021. However, the company is also into wind energy, solar energy, and energy storage businesses.
Steady cash flow comes from long-term energy contracts with PPAs, which buy most of its energy.
The company is projecting more growth based on its extensive renewable energy projects billed to come online soon. Thanks to its sterling performance and excellent outlook, Brookfield had a market cap of $13.6 billion on April 7th.
Clearway is a big-time player in the American renewable energy market. In addition to extensive wind and solar energy portfolios, the company operates highly efficient power plants running on natural gas. It also sells its energy to PPAs, ensuring a constant revenue stream.
Since its inception, investors in Clearway stocks have reaped annual returns that total almost 10 percent. The firm is controlled by Global Infrastructure Partners, a private equity company. Clearway is gunning for between 5 and 8 percent annual dividend growth in the nearest future.
Clearway closed trading on April 7th with a market cap of $7 billion.
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