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Hey Scoopers,

Happy Wednesday!! Ready to tackle the midweek hustle?

Today, we look at top clean energy stocks that have the potential to create game-changing wealth for shareholders in the next two decades.

So, let’s go 🚀

Clean Energy: Massive Untapped Potential

The world economy is shifting towards clean energy solutions at a rapid pace. Several countries are moving away from fossil fuels to alternative energy sources to combat climate change.

Research reports estimate the decarbonization of the global economy might attract a whopping $150 trillion in total investments in the next three decades.

Renewable energy is expected to play a crucial role in this transition. Let’s see how.

The Bull Case for Investing in Clean Energy

Currently, renewable energy sources, including wind, solar, and hydroelectric power, supply about 20% of the total electricity generated in the U.S.

In the last decade, renewable energy companies have quadrupled their electricity-generating capacity.

In 2022, the U.S. Congress passed the Inflation Reduction Act. The legislation had allocated $369 billion towards energy security and climate change investments.

Due to government support and rising demand, clean energy is increasingly economical as costs associated with solar panels, wind turbines, and energy storage batteries are falling.

Given multiple secular tailwinds surrounding this sector, let’s see how you can invest in clean energy stocks right now.

Top Renewable Energy Stocks In 2024

Several companies focus on renewable energy, putting them in a position to benefit from this megatrend.

But a few quality energy companies stand above their peers as the best renewable energy stocks to buy. Some of the top-tier green energy companies include:

NextEra Energy

The largest clean energy company in the world, NextEra, generates power at its Florida utilities, which is sold to other utilities under PPAs.

The company unveiled a Real Zero plan two years back, aiming to eliminate carbon emissions from its operations by 2045.

It is also on track to expand solar energy and storage capacity while replacing natural gas at its power plants with green hydrogen and renewable natural gas.

In the last decade, NextEra has returned 273% to investors, creating significant shareholder value.

Since 2012, the company has expanded adjusted earnings per share by 9.8% annually, while dividends have risen by 11% each year in this period.

NextEra is a Dividend Aristocrat, a company defined as one that has raised dividends for at least 25 consecutive years.

Down 33% from all-time highs, NextEra currently offers a tasty dividend yield of 3%.

Its capital investments should drive future cash flows higher, enabling NextEra to raise dividends between 6% and 8% annually through 2026.

Armed with one of the best balance sheets in the utility sector, NextEra should be on your shopping list today.

Brookfield Renewable

Another clean energy giant, Brookfield, is among the world’s largest producers of hydroelectric power, which accounts for 50% of its portfolio in 2023. The company is also increasing its wind, solar, and energy storage capacity.

As a publicly listed entity, Brookfield has generated annualized returns of 16%. It has steadily gained traction in this segment on the back of accretive acquisitions and development projects.

Since 2013, Brookfield’s earnings have grown by over 10%, while dividends have increased by 6% annually.

It aims to increase earnings by 10% each year through 2028, supporting annual dividend hikes of between 5% and 9%.

Clearway Energy

Valued at $5.4 billion by market cap, Clearway Energy is a mid-cap stock with massive potential. Clearway complements its wind and solar energy portfolio with efficient facilities powered by natural gas.

Clearway sold its thermal business for $1.35 billion in 2022 and used the proceeds to expand its renewable energy operations. It has since been acquiring renewable energy assets, which should drive future cash flows higher.

While the stock is down 30% from record highs, it has more than doubled investor returns in the last five years.

In the past 12 months, it has paid shareholders total dividends of $1.54 per share, indicating a yield of over 5%.

Clearway Energy expects to increase dividends between 5% and 8% through 2026. It has raised the payouts by 8% annually in the last eight years.

First Solar

A company that develops and manufactures solar panels for utility-scale solar energy projects, First Solar is valued at $17.8 billion by market cap.

A leading solar panel manufacturer, First Solar has contracts in place to sell panels stretching out to 2030, providing investors with top-line visibility for years.

First Solar is forecast to end 2023 with $1.65 billion in net cash, providing it with enough liquidity to fuel its expansion plans.

It invested $1.1 billion in a manufacturing facility in Louisiana in 2023, which should begin operations in 2026.

Unlike NextEra and Brookfield, First Solar does not pay shareholders any dividends. But it is growing at a rapid pace.

Analysts expect First Solar to increase revenue from $2.62 billion in 2022 to $4.57 billion in 2024. Comparatively, adjusted earnings are forecast to expand from $7.75 per share in 2023 to over $13 per share in 2024.

Priced at four times forward sales and 12.5x forward earnings, First Solar stock is relatively cheap and trades at a discount of 36% to consensus price target estimates.

The Key Takeaway

Clean energy is a megatrend that can help you generate market-beating returns in the long term.

As most renewable energy companies sell a bulk of their power under long-term PPAs, their cash flows are stable across market cycles, allowing them to pay shareholders an attractive dividend.

In the last two years, rising interest rates have acted as a headwind for capital-intensive clean energy companies due to higher interest payments, which results in lower cash flow and earnings.

But the pullback enables you to buy quality stocks trading at a massive discount to consensus price target estimates.

Green energy companies such as NextEra and Brookfield, which have already proven to be value creators and have the financial strength to capture opportunities, should yield outsize total returns in the coming years.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.