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Renewable energy was considered a niche segment of the energy industry. However, renewable energy stocks have continued to explode in interest over the years, as the global economy shifts toward greener forms of energy.
Renewable energy stocks can encompass a wide range of industries. These include wind, solar, biomass, hydroelectric, and geothermal energy, among others. Thus, there’s plenty of potential options for investors to choose from.
With governments around the world moving towards renewable energy, there is immense potential for renewable energy stocks to grow. The renewable energy market is expected to grow at a compound annual growth rate of 8.4% through this decade, and the market valuation of the sector could cross $1 trillion by then.
Savvy investors know that making the right moves will generate impressive gains. While the renewable energy sector is picking pace, here are my top three picks for growth investors seeking quality renewable energy stocks.
NextEra Energy (NEE)
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At the top of my list of renewable energy stocks to buy for growth is NextEra Energy (NYSE:NEE). It is one of my all-time favorite energy stocks to buy, and one of the largest electric utility holding companies in terms of its market cap.
Currently, NEE stock is trading around $78 today, and is down 6% year to date. The stock had lost close to 9% of its value in the past year. However, the drop is temporary, and likely linked to deteriorating macroeconomic conditions.
Indeed, NextEra is growing at an impressive rate in terms of financials. It has a 48% gross margin and 19% net margin, better than several other energy companies in the industry today.
Stephan Lingnau, an Erste Group analyst, has upgraded the stock to buy from hold due to the company’s 6% year-over-year rise in operating income. He expects the dividend to increase by 10% each this year and next year. Additionally, the company is paying a dividend of 46.75 cents per share, a 10% increase from the previous year. Thus, NEE is one of the best renewable energy stocks to buy for growth and income right now.
The company’s management team expects earnings to grow between 6% and 8% annually through 2026, with dividend increases amounting to 10% through at least 2024. While NextEra already has a sound balance sheet, it is also working towards achieving its long-term goals. It has signed contracts for 19 gigawatts of capacity, and aims to build 41.8 gigawatts of new projects between 2023 and 2026.
NextEra is already halfway towards achieving its long-term goals, and we could continue seeing the shift from the existing business, which is heavily focused on utilities. This stock will not disappoint, no matter the market situation.
Brookfield Renewable (BEPC)
Next on the list is Brookfield Renewable (NYSE:BEPC) which is also one of the largest companies when it comes to sustainable energy. The company manages energy systems that comprise solar, wind, and hydroelectric across Asia, America, and Europe. It has more than $800 billion in assets under management, and one solid reason to bet on this company is its 120 gigawatts of capacity held across its portfolio. Brookfield also has 110 GW worth of projects under development.
Brookfield recently announced that it plans to buy Origin Energy for $750 million, and this acquisition will make the company one of the largest in the business. The company plans to invest billions of dollars in constructing additional renewable energy generation in the coming years, which should provide revenue and cash flow stability. With more acquisitions, it will generate more business, and could reward shareholders with a higher dividend.
Last year, the company provided triple-digit growth in operating cash flow and EBITDA margins. Currently, BEPC stock is trading around $33 per share today, and is up 19% year to date. The company has performed consistently, even when the market was in turmoil, and I expect it to pick pace as the market improves later this year.
Despite the substantial quarterly numbers, the stock hasn’t had a chance to move higher. It hasn’t been able to hit $40 in the last six months, but once the market improves, there is a high chance for BEPC stock to shine. Additionally, the company provides a dividend yield of 4%, an added sweetener for investors. Brookfield Renewable reports results on May 5.
First Solar (FSLR)
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First Solar (NASDAQ:FSLR) is an established solar cell manufacturer specializing in designing and producing modules that are very famous for their high efficiency in converting sunlight to electricity. Currently, FSLR stock is trading around $216 per share today, and is up 49% year to date. The stock has gone from the $70 level in April 2022 to $218 today, and there appears to be no stopping its momentum. I believe it is one of the renewable energy stocks with long-term growth potential that will hit a new 52-week high very soon.
The U.S. government is offering incentives to solar companies, and this is where First Solar is set to benefit. The company aims to increase its capacity by six gigawatts by 2024, which will help power close to 4.5 million homes. The company reported net sales of over $1 billion in the recent quarter, a 10% rise from the previous year. It also reported a narrow loss as compared to last year. The company aims to hit net sales of $3.4 billion to $3.6 billion this year and an EPS of $7 to $8.
Do not wait for the stock to dip too low, because that may not happen soon. Load up on this stock whenever you have a chance.
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.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.
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