Rapid action is being taken by economies throughout the globe to find alternative energy sources.
Concerns about global warming have prompted a transition away from fossil fuels, which are rich in carbon, and toward renewable energy and other environmentally friendly alternatives.
Decarbonizing the global economy will need an investment of almost $150 trillion over the next 30 years.
The use of renewable energy sources is crucial to the current energy revolution.
Here we take a closer look at renewable energy investment opportunities.
Why should one invest in renewable energy firms’ stock?
Hydroelectric, solar, and wind power provide 20% of the power that the United States power sector uses today.
The sector’s capacity to produce electricity has increased fourfold in the last decade due to its meteoric rise in popularity.
Concerns about climate change have increased, prompting a recent quickening of the pace.
If it wants to help the economy decarbonize quickly, it has to keep speeding up.
As a result of climate change, organizations and enterprises need to focus on ways to help decarbonize the economy.
More and more companies are forming power purchase agreements (PPAs) with electric utilities and other electricity suppliers to obtain energy that is produced from renewable sources.
Meanwhile, some people are purchasing shares in companies that are actively working to generate renewable energy.
Some individuals are investing in renewable energy in an effort to be seen as socially responsible global citizens.
Sustainable energy is becoming more accessible as a result of the falling prices of wind turbines, solar panels, and energy storage batteries.
As a consequence, investors are starting to take notice of the sector.
Governments throughout the world are also trying to speed up the decarbonization process by passing legislation to increase investment in the sector.
The United States Congress, for example, passed the Inflation Reduction Act the same year (2022).
Energy security and climate change will get $369 billion in investments, spurred by the legislation.
Many people consider spending plans like that as only a first step toward the capital needed to decarbonize the economy.
If this view is correct, more legislation may encourage more investment in the country.
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Five renewable energy stocks to watch in 2024
Companies with a focus on renewable energy are well positioned to take advantage of this huge investment trend. However, when it comes to renewable energy stocks, there is a small set of companies that stand out. Prominent renewable energy companies include:
1. NextEra Energy
The wind and solar power generation industry is headed by NextEra Energy (NEE -0.94%).
In addition to powering its Florida utilities, the company’s energy resources section sells electricity to other utilities and large corporations via power purchase agreements (PPAs).
Among the few companies making a bigger bet on renewable energy, NextEra Energy stands out.
The utility unveiled its Real Zero plan in 2022 with the aim of fully eliminating carbon emissions from all operations by 2045.
In addition to significantly boosting its solar power and storage capacity, it aspires to switch its power plants from using natural gas to using sustainable natural gas and green hydrogen.
When it comes to renewable energy, NextEra has a proven track record of rewarding s s.
Almost the last decade, it has produced a return of almost 260%.
Thanks to its above-average growth rate, investors have seen strong returns on their investments.
The adjusted earnings per share (EPS) growth rate for NextEra from 2012 to now is 9.8 percent per year.
That period has seen the dividend rise for over 25 consecutive years, at an average rate of 11%.
The company plans to keep paying dividends to its shareholders since its investments are doing well.
With further investments in renewable energy, it expects earnings to climb at or around its target range of 6% to 8% per year until at least 2026.
We expect NextEra to provide dividend increases of around 10% each year until at least 2024.
While this is happening, it will likely have one of the most robust balance sheets in the utility sector, giving the company plenty of room to manoeuvre financially as it expands.
2. Brookfield Renewable
When it comes to renewable energy, Brookfield Renewable (BEP -1.09%) is at the top of the globe.
It generates hydroelectric power on a massive scale, and by 2023, it will make up half of its portfolio.
In addition, Brookfield has been learning more about energy storage, solar (including rooftop solar and utility-scale distributed generation), and wind (offshore and onshore).
Consistent cash flow is provided by the bulk of the company’s power sales, which are made under long-term PPAs.
Over the years, Brookfield has achieved great success. Since its inception, the business has achieved a total return of 16% per year.
A steady stream of acquisitions and new projects have expanded its portfolio, driving its growth.
Brookfield has had a profit growth of over 10% each year on a compounded basis over the last decade.
That is why, since 2014, its dividend payments have increased at a CAGR of 6%.
With its extensive portfolio of renewable energy development projects and future acquisitions, Brookfield expects even more growth beyond 2028, with yearly EPS growth of more than 10%.
This earnings growth should allow the business to raise its dividend by 5% to 9% every year, making it one of the best renewable energy dividend stocks.
It plans to maintain a strong financial position, which will enable it to sustain its growth.
3. Clearway Energy
Clearway Energy (CWEN -1.12%), a United States-based renewable energy power plant owner, is among the largest in the country.
Solar and wind power are only two of its many renewable energy sources; its facilities fueled by natural gas are also very efficient.
Clearway also sells its power via PPAs to provide a steady stream of revenue for the company.
To expand its renewable energy operations, the firm raised $1.35 billion in 2022 from the sale of its thermal segment.
Consistently, it has been investing funds via the acquisition of renewable energy assets.
The company’s visibility and dividend growth prospects are both improved by the deals.
Thanks to its recent deals, Clearway Energy now expects to be able to raise its dividend until at least 2026, reaching the top end of its target range of 5% to 8% each year.
Meanwhile, its financial profile will remain constant. Clearway Energy has excellent prospects for expanding its renewable energy operations and creating substantial wealth for its shareholders in the coming years.
4. First Solar
The thin-film solar panels made by First Solar (FSLR 2.94%) are more efficient than competing technologies because they make use of their larger size.
This makes them ideal for solar energy installations on a utility scale.
Being one of the leading solar panel manufacturers in the world, the company is in a strong position to take advantage of the expanding solar panel industry.
To better meet the demand for solar panels, it is investing heavily.
As in the second quarter of 2023, it has contracts to sell panels that stretch all the way until 2030, so it knows exactly how much money it will make.
First Solar has the financial wherewithal to explore new opportunities because to its stellar balance sheet.
By the end of 2023, the company expected to have a net cash balance of $1.5 to $1.8 billion, even though it had invested heavily in increasing its production capacity.
Because of the buffer, it has a ton of financial leeway to keep expanding, which it can use to its advantage in the solar panel market.
Production is scheduled to commence in 2026 from a new $1.1 billion facility that started building in Louisiana in late 2023.
Additionally, it may still choose to acquire more advanced technology if it so desires.
The 2023 acquisition of famous European thin-film maker Evolar by First Solar, for example, bolstered the company’s ability to develop next-generation solar technology.
5. SolarEdge Technologies
The company SolarEdge Technologies (SEDG -5.45%) develops and sells an upgraded inverter system.
It contributes to lowering the system’s total energy cost by making the most of the power supplied by solar panels.
With the world’s solar energy growth speeding up, SolarEdge Technologies, like First Solar, expects to benefit.
The company has started using its inverter expertise to the development of further smart energy solutions.
Due to a string of acquisitions, it now offers a wider variety of products that cover a wider range of energy market segments, including solar, storage, electric vehicle charging, batteries, uninterruptible power supplies, electric vehicle powertrains, and grid services solutions.
Thanks in part to its rock-solid financial position, SolarEdge Technologies has grown into smart energy solutions.
Inverters, the company’s primary product offering, provide substantial revenue.
It was able to expand and capitalize on the decarbonization megatrend to a greater extent by the end of its second quarter in 2023, when it had around $900 million in net cash.
Promising financial rewards for anyone who put their money into the market
Climate change and ethical investing are two key forces propelling the green energy revolution.
This tendency will drive billion-dollar expenditures in renewable energy over the next several decades.
Even if the rising wave of clean energy should benefit everyone, the leading renewable energy companies should provide the highest returns for investors.
Over the next several years, investors may reward green energy companies with disproportionate returns if they prove they can generate value and are financially stable enough to grab chances.
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