The solar industry has had a strong year in 2019, with demand in the U.S. and around the world coming in better than expected. By the end of the year installations are expected to be a record 114 gigawatts (GW), enough to power 18.7 million U.S. homes annually.

Solar stocks have also had a good year, with everyone from installers to manufacturers enjoying rising share prices. So, which are still buys? As things stand today, TerraForm Power (NASDAQ:TERP), SunPower (NASDAQ:SPWR), and First Solar (NASDAQ:FSLR) are the three solar stocks that I think are worth putting on your buy list

Solar farm with wind turbines in the background.

Image source: Getty Images.

Solar energy's best dividend stock

There are a number of ways to invest in solar energy, and one that can pay dividends long-term is owning yieldco stocks. A yieldco is simply a company that buys solar energy projects and generates revenue from selling electricity to utilities, corporations, or homeowners. The cash flow from these projects is then used to fund growth, or paid back to investors in the form of a dividend. 

TerraForm Power's dividend yield of 4.7% isn't the highest you'll find on the market, but it's built to last for decades. The weighted-average remaining contract duration of the company's assets is currently 13 years, and 90% of generation is contracted for more than five years. This ensures cash flow will keep coming into the company long-term.

What TerraForm Power's management aims to do is return 80% to 85% of cash available for distribution to shareholders in the form of a dividend, using the rest to pay down debt or fund growth. They expect that to result in a 5% to 8% annual increase in the dividend long-term, with total returns to shareholders in the low teens. Given the stability of renewable energy power plants and their cash flows, this is a dividend stock I would buy and hold for decades.

The premium solar stock

SunPower has always been a manufacturer of high-efficiency solar panels and priced its products at a premium, but now it's becoming more cost-effective against commodity competition. New manufacturing for the A-Series solar panel has increased cell size and reduced the number of manufacturing steps, lowering cost to be more in-line with commodity solar manufacturers. It's also making a panel for utility-scale and commercial projects known as the P-Series, which is made from commodity solar cells and assembled in a way that's more efficient than traditional processes. 

Where SunPower is gaining traction is primarily in residential and commercial solar projects, where its higher-efficiency product stands out. The company has the #1 market share position in the U.S. in commercial solar, and is top-3 in the U.S. in residential solar. That position hasn't yet led to a profitable business, but management expects to generate $100 million to $120 million in EBITDA this year, and return to profitability in the second half of the year. Lower manufacturing costs are a big part of improving SunPower's cost competitiveness.

SunPower is a risky solar stock and its success will rely on lower costs and customers valuing high efficiency and high quality for solar panels. But I think that's the way the industry is trending, and in the long term this will be a big winner for investors. 

The money maker

First Solar has been under siege from commodity solar manufacturers and upstart solar developers for years, but the company continues to be one of the most profitable in the solar industry. The upgrade to Series 6 solar panels, which are larger than previous models at a lower cost, should keep the company competitive for years to come. 

What First Solar has managed to do over time is slowly but surely improve the efficiency and cost of its solar panels. That's kept the company competitive, and allowed it to develop projects internally and work with partners to be a critical supplier to third-party developments. 

What investors should be excited about from First Solar is the company's cash position. The company expects to have a net cash balance of $1.7 billion to $1.9 billion at the end of 2019, and has historically generated strong cash flow before this current manufacturing upgrade cycle. 

FSLR Free Cash Flow (TTM) Chart

FSLR Free Cash Flow (TTM) data by YCharts

First Solar has a long history of being one of the most profitable solar companies in the world, and even with the current equipment upgrades taking place it expects earnings of $2.25 to $2.75 per share. If you're looking into solar stocks, this is a company that should definitely be on your buy list. 

Solar stocks are finally a great buy

The solar industry has been through a lot of ups and downs in the last decade, but today it's growing steadily, it's less reliant on subsidies, and leaders are starting to emerge as upstarts go out of business. TerraForm Power, SunPower, and First Solar are all leaders in their respective parts of the business, and that's why they're the solar stocks I would buy right now. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.