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The world is rapidly transitioning towards renewable energy sources to address climate change concerns and decarbonize the global economy. As governments and companies strive to meet climate targets, investing in renewable energy stocks has become an attractive opportunity. The renewable energy sector, including solar, wind, and green hydrogen, is projected to see significant growth and investment in 2024, driven by factors like the Inflation Reduction Act and increasing demand for decarbonization.
This article explores the top renewable energy stocks to consider for investment in 2024, examining their potential for dividends, capital expenditures, and growth in the rapidly evolving energy transition. We’ll analyze solar energy stocks, offshore wind, hydrogen stocks, and other key players in the renewable energy sector.
What are Renewable Energy Stocks?
Renewable energy stocks are a type of investment that allows you to participate in the growing field of renewable energy. Renewable energy sources, such as solar, wind, and hydro power, are becoming increasingly important as the world looks to reduce its reliance on fossil fuels.
There are a number of reasons to invest in renewable energy stocks. First, the demand for renewable energy is growing rapidly. This is due to a number of factors, including climate change, government policies, and falling costs of renewable energy technologies.
Second, renewable energy stocks can offer investors high growth potential. As the renewable energy industry continues to grow, renewable energy companies are likely to see their stock prices increase.
Finally, investing in renewable energy stocks can be a way to hedge against the risks of climate change. As the world transitions to a low-carbon economy, companies that are reliant on fossil fuels are likely to see their stock prices decline.
Renewable Energy Stocks: Top Energy Stock 1
NextEra Energy (NEE) is one of the world’s largest producers of wind and solar energy, generating power at its Florida utilities and its energy resources segment, which sells electricity under PPAs to other utilities and large corporate buyers.
Company Overview
Few companies are betting bigger on renewable energy than NextEra Energy. The utility unveiled its Real Zero plan in 2022 to eliminate carbon emissions from its operations by 2045, aiming to significantly expand its solar energy and storage capacity while replacing natural gas in its power plants with green hydrogen and renewable natural gas.
Key Financials and Valuation Metrics
NextEra has an excellent track record of creating shareholder value by investing in renewable energy, producing a total return of more than 225% during the past 10 years. Its above-average growth rate has powered strong investment returns, with adjusted earnings per share (EPS) expanding at a 10% compound annual rate since 2013. Meanwhile, it has boosted its dividend at an 11% annual rate during that period, pushing its growth streak to 30 consecutive years.
Growth Prospects and Catalysts
The company expects its investments to continue paying dividends to shareholders, predicting earnings will increase at or near its 6% to 8% annual target range through at least 2026, powered by continued investments in renewable energy. NextEra expects to deliver around 10% annual dividend growth through at least 2026, while likely maintaining one of the best balance sheets in the utility sector, giving it the financial flexibility to continue expanding.
Risks and Challenges
While NextEra Energy is a leader in the renewable energy sector, it still faces risks and challenges associated with the energy industry, such as regulatory changes, fluctuations in commodity prices, and potential disruptions in its operations or supply chain. Additionally, the company’s ambitious growth plans may require significant capital expenditures, which could impact its financial performance if not executed effectively.
Top Energy Stock 2
Company Overview
Brookfield Renewable (BEP -1.93%) is a global leader in renewable energy, being one of the world’s largest producers of hydroelectric power, which will make up 50% of its portfolio in 2024. The company has been increasing its expertise in wind (onshore and offshore), solar (utility-scale and distributed generation, such as rooftop solar), and energy storage. Brookfield sells the bulk of its power under long-term power purchase agreements (PPAs) that generate steady cash flow.
Key Financials and Valuation Metrics
Brookfield has an excellent track record, increasing its dividend payments at a 6% compound annual rate since 2001 while growing its funds from operations (FFO) per share at a 12% rate since 2016. The steady expansion of its portfolio through acquisitions and development projects has driven its growth.
Growth Prospects and Catalysts
Brookfield sees even more growth ahead — annual FFO per share growth of more than 10% through 2028 — powered by its extensive pipeline of renewable energy development projects and additional acquisitions. The earnings growth should enable the company to hike its dividend by 5% to 9% annually, making it one of the best renewable energy dividend stocks. It expects to maintain a top-notch balance sheet, giving it the financial flexibility to keep expanding.
Risks and Challenges
The impact of unprecedented investment in renewable infrastructure will likely become more apparent in 2024, with regulatory boosts to renewable energy and transmission buildout potentially helping address grid constraints. Workforce challenges may be greatest in new industries such as clean hydrogen, with skill gaps across core roles like electrical engineering, manufacturing processes, and automation. More developers are expected to implement strategies focusing on equity, quality, agility, and collaboration to help unlock the workforce bottleneck in 2024.
Top Energy Stock 3
Company Overview
Clearway Energy (CWEN 0.69%) is one of the largest owners of renewable energy generating facilities in the U.S. It complements its wind and solar energy portfolio with highly efficient facilities powered by natural gas. Clearway also sells its power via PPAs that generate a steady cash flow for the company.
Key Financials and Valuation Metrics
The company sold its thermal business in 2022, generating $1.35 billion in cash to spend on expanding its renewable energy operations. It has been steadily putting money to work by acquiring renewable energy assets. The deals are providing the company with increasing visibility for its ability to increase its dividend.
Growth Prospects and Catalysts
As a result of its deals, Clearway Energy now expects to be able to hike its dividend towards the high end of its 5% to 8% annual target range through at least 2026. Meanwhile, it anticipates maintaining a solid financial profile. Clearway Energy is positioned to continue capitalizing on opportunities to increase its renewable energy operations in the coming years while creating substantial value for shareholders.
Risks and Challenges
The stock prices of energy companies are often linked to the prices of energy products themselves, which may be highly volatile. Investors focused on ESG goals may find it difficult to target energy companies for investment while maintaining these principles, as fossil fuels are a major contributor to climate change.
Top Energy Stock 4
Company Overview
The renewable energy sector represents a massive market with strong growth potential, including companies exploring and developing renewable energy sources like solar, wind, and green hydrogen, as well as some consolidated utility firms.
Key Financials and Valuation Metrics
Energy stocks as a group have had a stronger start to 2024 than in 2023, as the price of oil has been higher. The stock prices of energy companies are often linked to the prices of energy products themselves, which may be highly volatile. The global energy market has a value of roughly $6 trillion, indicating its enormous size and reliance on the energy sector to power various industries.
Growth Prospects and Catalysts
The United Nations expects the world to invest $2.4 trillion per year over the next 11 years in energy systems to achieve the Paris Climate Agreement goals, highlighting significant growth potential for the energy industry. As the world transitions to renewable energy sources, investors will have more opportunities to invest in companies unrelated to traditional fossil fuels.
Risks and Challenges
However, energy stocks are heavily dependent on energy prices, which are tied to geopolitical factors and variables, making the sector highly volatile at times. Investors focused on ESG goals may find it difficult to target energy companies while maintaining these principles, as fossil fuels contribute significantly to climate change. Energy stocks carry risks including bankruptcy and volatility, despite their lucrative potential.
Renewable Energy Stocks: Top Energy Stock 5
Company Overview
SolarEdge Technologies (SEDG -1.33%) develops and manufactures an optimized inverter system that maximizes the power produced by solar panels, helping to lower the cost of energy generated by the system. Like First Solar, SolarEdge Technologies should benefit from the accelerating growth of solar energy worldwide.
Key Financials and Valuation Metrics
The company has leveraged its expertise in inverters to create other smart energy solutions. It has expanded its offerings through acquisitions to gain technology, expertise, and products across several energy market segments, including solar, storage, electric vehicle (EV) charging, batteries, uninterruptible power supplies, EV powertrains, and grid services solutions. It continued expanding through acquisitions in 2024, acquiring the EV charging optimization and management software start-up Wevo Energy.
SolarEdge Technologies has been able to expand into smart energy solutions, thanks in part to its strong financial profile. The company’s core inverter business is profitable and generates substantial cash, with almost $900 million in cash at the end of 2023, giving it the flexibility to continue expanding and capitalizing on the decarbonization megatrend.
Growth Prospects and Catalysts
The renewable energy sector represents a massive market with strong growth potential, including companies exploring and developing renewable energy sources like solar, wind, and green hydrogen, as well as some consolidated utility firms. The United Nations expects the world to invest $2.4 trillion per year over the next 11 years in energy systems to achieve the Paris Climate Agreement goals, highlighting significant growth potential for the energy industry. As the world transitions to renewable energy sources, investors will have more opportunities to invest in companies unrelated to traditional fossil fuels.
Risks and Challenges
However, energy stocks are heavily dependent on energy prices, which are tied to geopolitical factors and variables, making the sector highly volatile at times. Investors focused on ESG goals may find it difficult to target energy companies while maintaining these principles, as fossil fuels contribute significantly to climate change. Energy stocks carry risks including bankruptcy and volatility, despite their lucrative potential.
Conclusion on Renewable Energy Stocks
The renewable energy sector presents a compelling investment opportunity as the world transitions towards a sustainable and decarbonized future. As highlighted in this article, companies like NextEra Energy, Brookfield Renewable, Clearway Energy, and SolarEdge Technologies are well-positioned to capitalize on the growing demand for [renewable energy sources](https://5starsstocks.com/2024/05/17/5starsstocks-com/). With their strong financial performance, ambitious growth plans, and innovative solutions, these stocks offer potential for both dividends and capital appreciation.
However, it is essential to conduct thorough research and due diligence, as the energy sector can be volatile and subject to various risks. Investors should consider diversifying their portfolios and aligning their investments with their individual risk tolerance and investment objectives. By carefully evaluating the opportunities and challenges in the renewable energy space, investors can make informed decisions and potentially benefit from the energy transition driving our planet towards a more sustainable future.
