The world is rapidly moving towards switching its energy sources to reduce climate damage. Due to the extreme climate change concerns, governments are planning to move away from carbon-based fossil fuels and are looking for alternative energy sources. Renewable energy will play a huge role in this transition, and it can help achieve climate change goals.
While renewable energy can play a huge role in the world climate, it only supplies about 20% of the electricity generated by the power sector through sources like solar, wind, or hydroelectric power. The sector’s growth pace has quickened, and several companies are expanding their production capacity. If you believe in a cleaner and greener future, it is time to invest in renewable energy.
While you cannot invest directly in the projects, you can invest your money in renewable energy stocks with long-term growth potential. Let’s dig deeper into the best renewable energy stocks to buy now.
Best Renewable Energy Stocks to Buy: NextEra Energy (NEE)
At the top of my list is NextEra Energy (NYSE:NEE) which is the world’s largest producer of solar and wind energy. It is one of the best renewable energy stocks to buy. The company generates power at the Florida plant and sells it to other users and utilities. NextEra has stable financials, and it is growing steadily. In the recent earnings report, the company showed double-digit growth across several areas, and it has signed 8,000 megawatts of new projects.
One solid reason to invest in the company is its 5.8 million customer accounts which are also America’s largest utility accounts. The company has several contracts to keep it busy in the coming years and is also investing in green hydrogen.
It announced Real Zero last year and committed the company to eliminate emissions from its operations by 2045. NEE stock is trading at $76 today and has been steadily growing over the past month. It has generated more than 1,000% returns since its listing. The company also enjoys a dividend yield of 2.5% and plans to increase the dividend by 10% each year through 2024.
There are very few energy companies in the industry that are performing better than NextEra Energy. The company expects the earnings to increase near the 6% to 8% annual target range through 2025. This stock will continue to reward investors as the focus on renewable energy sources increases. Erste Group analyst Stephan Lingnau has recently upgraded the stock from hold to “buy” after the quarterly results. The analyst cites the 6% year-over-year increase in operating income and a 10% dividend rise this year and next as a reason for the upgrade.
Brookfield Renewable (BEPC)
Another global leader in renewable energy, Brookfield Renewable (NYSE:BEPC), is one of the biggest hydroelectric power producers, making up 50% of its portfolio. The company has increased its solar, wind, and energy storage capacities. Brookfield has a solid track record and generated $1.56 per share in funds from operations in 2022. Its revenue stood at $4.7 billion in 2022. It has 19 GW assets under construction, and 110 GW are in the pipeline. BPEC stock looks highly undervalued today, trading at $34, yet it is up 22% over the past month. At the current level, BPEC stock is a screaming buy and one of the best renewable energy stocks to buy.
The company enjoys a dividend yield of 4.6% and has an excellent balance sheet. It consistently grows the business through acquisitions and development projects that help drive growth. The company expects more growth due to the pipeline of renewable energy development projects. These projects will help the company increase the dividend by 5% to 9% annually. With high liquidity, the company can reward investors while investing in other companies and affiliate businesses in the energy space. Investing in this renewable energy company means consistent dividend payouts and a solid growth potential.
First Solar (FSLR)
My third renewable energy stock pick is First Solar (NASDAQ:FSLR). The company develops and manufactures solar panels to generate energy. It is one of the top companies in the industry today, and it uses thin-film panels, which use a larger size to ensure high efficiency. There is a massive rise in the demand for solar panels, and First Solar is positioned to benefit from the trend. It is investing to increase the production of solar panels to meet the demand. FSLR stock is trading at $213 today, up more than 60% in the past six months. Despite the market uncertainty, the stock has generated more than 100% return for investors in one year.
The company had sold out all its capacity through 2024 by mid-2022, which shows its potential to grow in the coming years. It also has contracts to sell panels until 2026, which means the company will continue generating revenue for the next few years.
First Solar has a very impressive balance sheet and high liquidity. Due to the impressive cash flow, the company has the flexibility to invest and expand to meet the rising demand for solar panels. The company ended 2022 with a cash balance of $2.4 billion and has a positive outlook for 2023.
Barclays has a price target of $230 with an Equal Weight rating on the shares. The analyst expects the gross margins to hit 30% throughout the firm’s forecast period.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.