Renewable energy stocks clearly aren’t creating the same sort of buzz they were several years ago. Don’t be fooled though. This business is as promising now as it ever was. It’s just a different kind of promising. Most of the industry’s key players are considerably more mature now than they were then. There’s also a better understanding of what’s working within the industry, and what isn’t.
To this end, here’s a closer look at three renewable energy stocks to consider adding to your portfolio sooner than later while they’re still down from recent highs. Just bear in mind you’ll want to stick with these holding for years -- if not decades -- to reap their full potential.
Cameco
If you’ve been tuned into the stock market at all for the past few months then you likely know nuclear power is making a comeback. After years of disinterest -- stemming mostly stemming from safety concerns -- the world’s now realizing it won’t be able to meet its carbon-emission goals without help from this zero-emissions option. That’s wjhy one of the two mothballed nuclear reactors at Harrisburg, Pennsylvania’ Three Mile Island is now slated to be restarted.
It’s still just the beginning though. The International Energy Agency believes the planet’s nuclear power-production capacity is apt to grow by more than 50% through 2050, while at the highest end of its expectations could more than triple during this timeframe.
Problem: The world’s going to need more nuclear fuel to generate more nuclear power. In most cases that fuel is uranium.
Enter Cameco (CCJ 0.53%), one of the planet’s top suppliers of uranium, with access to plenty of high-grade reserves. Its two chief mining operations in Saskatchewan, Canada are currently jointly capable of producing a total of 43 million pounds of high-grade uranium per year, but both could support more output at only marginally more cost. (For perspective, the World Nuclear Organization says the global nuclear power industry current consumes on the order of 150 million pounds of uranium per year, without any of the industry’s forecasted growth making a measurable impact on this demand yet.)
Do prepare for continued volatility from Cameco stock that reflects the continued volatility of uranium prices… although maybe not quite as much as you might expect. Confidence in nuclear power as a clean source of electricity is slowly but surely improving, leveling out these swings.
Brookfield Renewable
If you feel confident that renewable energy as a whole is investment-worthy but you don’t know where to start, consider a stake in Brookfield Renewable Corp. (BEPC -2.00%) (BEP -2.76%). With it, you’ll own a little of everything the business encompasses.
In simplest terms, Brookfield Renewable buys and/or builds renewable-energy production operations. As of the middle of last year its assets were capable of producing nearly 27,000 megawatts’ worth of electricity, with another 112,000 megawatts’ worth of capacity in-development… mostly wind and solar. It’s also building a major energy-storage facility. All of these will ultimately serve utility and utility-scale customers that simply need access to cost-effective power.
Between this model and its focus on funding a dividend that currently translates into a forward-looking yield of just under 5.4%, it’s perhaps best compared to a utility stock… but an outstanding utility stock capable of the sort of growth seen outside of the utility sector Since 2016, its funds-from-operations have improved by its targeted annual average of 12%.
Only some of this cash flow has trickled back to investors in the form of dividends, to be clear. The rest has simply added value to Brookfield Renewable’s shares by virtue of being plugged into a growth market.
There is one detail worth pointing out there. That is, this is NOT Brookfield Asset Management, Brookfield Corporation, or Brookfield Wealth Solutions. Although all of these companies are related, Brookfield Renewable is the only one with direct exposure to the alternative energy market. The others are simply involved in the management and marketing of Brookfield Renewable.
First Solar
Looking for something simpler and more straightforward instead? Then stick with the most-proven sliver of the renewable energy business. That’s solar, which as the Motley Fool’s in-house research arm points out is most states’ top source of alternative energy generation. And the top prospect among these particular names at this time is (still) photovoltaic panel maker First Solar (FSLR 0.95%).
Not everyone is convinced. First Solar stock is down nearly 40% from its June peak largely on concerns that President-elect Donal Trump isn’t as supportive of solar power as his predecessor was. And, maybe he isn’t. The solar tax credits that boosted the business under Joe Biden’s watch are anything but guaranteed to last through Trump’s tenure.
As multiple insiders and experts have argued though, solar power’s momentum may simply be too strong to stop it now, especially now that it’s achieved price-parity with other forms of renewable power and is even knocking on the door of more traditional sources of energy including coal and natural gas. That’s a big reason solar accounted for nearly two-thirds of the United States’ power-production capacity growth during the third quarter of last year, according to the Solar Energy Industries Association. When nothing else does, money motivates!
To this end, Straits Research says the worldwide photovoltaic panel industry is set to grow at an average annualized rate of more than 25% through 2032, yet even then will still only account for a fraction of the planet’s total power-production capacity.
The irony is that the analyst community is still calling for strong growth from First Solar regardless of who’s occupying the White House. Last year’s projected top-line growth of 29% is expected to be followed by 32% growth this year, followed by 21% revenue growth next year. Even producing half of that anticipated growth should shake this stock out of its current funk and rekindle a long-term advance.
