Worries about solar panel tariffs in the United States and policy decisions in China to slow down renewable power development have affected the renewable power industry. But, the long-term outlook remains bright.
After all, the United States sourced nearly 15% of its electricity from solar panels, wind farms and hydroelectric dams last year. And it can’t be denied that this trend will rise this year. Wind power is poised to eclipse hydropower in 2019 as the country’s leading renewable energy source, and that hasn’t happened in over a 100 years. In fact, the U.S. Department of Energy expects solar energy to outshine the other renewable sources by 2030, when the country will lean toward solar alone to generate at least 30% of its electricity.
And we can’t forget that the organizers of the 2020 Olympic Summer Games to be held in Tokyo are looking to use 100% renewable energy, something that bodes well for the related stocks. The press facilities, international broadcasting center and athletes’ villages will also be powered primarily by solar and wind energy.
Thus, investors should start the search for well-managed renewable energy businesses. NextEra Energy Partners, LP NEP, Enviva Partners, LP EVA, Brookfield Renewable Partners L.P. BEP and Renewable Energy Group, Inc. REGI are good places for a start. Here is why —
NextEra Energy Partners Benefits From Parent Company
NextEra Energy Partners is predominantly a dividend growth oriented public company, created by NextEra Energy, Inc. NEE, the world’s largest publicly traded utility. NextEra Energy Partners thus acquired 1,400 megawatts of wind and solar assets from NextEra Energy Resources to expand its portfolio to 4,100 megawatts of wind and 600 megawatts of solar last year. In the process, NextEra Energy Partners has gained considerable advantage over peers, and its adjusted EBITDA and cash available for distribution (CAFD) are also poised to rise in the near term.
(Source: NextEra Energy Partners)
NextEra Energy Partners currently, has a Zacks Rank #2 (Buy). In the past 60 days, four earnings estimates moved north, while three moved south for the current year. The Zacks Consensus Estimate for earnings rose 6.7% in the same period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This owner and operator of contracted clean energy projects also flaunts a Momentum Score of A and has outpaced the Alternative Energy - Other industry in the past year (+3.1% vs +2.8%).
It’s Hard to Ignore an Excellent Dividend Player
Producer and supplier of utility-grade wood pellets Enviva Partners has secured an array of long-term contracts, the average length of which is almost 9.4 years. This has more or less ensured a steady stream of revenues over the next decade. What’s more interesting is that the company now needs to increase production by 53% to meet the contract requirements. So, there is plenty of room for growth in the near future.
At the same time, it’s hard to overlook Enviva Partners with an 8.5% dividend yield, compared to the Biofuels industry which hardly pays out any dividend. Needless to say, that a dividend player boasts a large customer base, sustainable business model, long track of profitability and strong liquidity.
The Zacks Rank #3 (Hold) company’s expected earnings growth rate for the current quarter is a promising 58.3%. The stock also flaunts a Momentum Score of B and has outperformed the industry so far this year (+7.4% vs +6.3%).
Brookfield Renewable Partners Diversification Stands in Good Stead
Brookfield Renewable Partners’ exposure to hydropower assets didn’t fetch much benefit last year. Record draining away of water in recent times, especially in North America and Brazil, affected the company’s fund flow from operations (FFO). But, its focus on acquiring new wind and solar assets across its portfolio has driven its year-over-year FFO to a great extent.
(Source: Brookfield Renewable Partners)
By the way, Brookfield Renewable Partners’ plans to buy back 5% of outstanding units this year and invest around $700 million per year in growth initiatives should certainly help its share price move north.
The Zacks Rank #3 company’s expected earnings growth rate for the current quarter is 109.1%, more than the Utility - Electric Power industry’s projected gain of nearly 77%. The stock also flaunts a Momentum Score of B and has outperformed the industry on a year-to-date basis (+12.1% vs +6.6%).
Renewable Energy — A Simple Yet Attractive Group
Renewable Energy Group basically turns animal fat and vegetable oil into diesel fuel. The company, in fact, can produce 575 million gallons of diesel fuel annually, 70% of which is sold to major fuel marketers. Simultaneously, demand for biodiesel is continuously increasing and that’s great news for the company. California, Texas, New York and seven other states demanded 1.5 billion gallons of diesel fuel last year, up from 1.15 billion in 2016.
The Zacks Rank 3 company’s expected earnings growth rate for the current year is 412.8%, in contrast to the Biofuels industry’s projected decline of 8.2%. The stock sports a Momentum Score of A and has outdone the industry over the past year (+143.2% vs +45.9%).
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