Thanks to the novel coronavirus-inspired market sell-off, there are plenty of new investment opportunities available to those with longtime horizons -- so many so, in fact, that it can seem overwhelming. From investments in toilet paper-affiliated companies to warehouse companies, for example, many investors have their eyes on consumer staples and retail stocks. But another area that's currently receiving less notoriety is the solar power industry.
Shining brightly in 2019, solar power accounted for 40% of all new electric-generating capacity in the United States -- an industry record. Experts had anticipated continued growth in 2020, but the challenges facing the economy due to COVID-19 suggest the industry may not beam as brightly as it did last year.
Nonetheless, the overarching trend remains that solar power is gaining favor and the headwinds facing the industry now are only temporary. Consequently, patient investors can prosper in the long term by initiating positions in solar power-oriented stocks such as Brookfield Renewable Partners (BEP 0.92%), Enphase Energy (ENPH -2.46%), and Hawaiian Electric Industries (HE 6.86%).
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Plenty of sun... and more
For investors who are setting their sights on the sun but also want exposure to other renewable energy sources, Brookfield Renewable Partners is an ideal choice. Representing a total installed capacity of approximately 19,000 megawatts (MW), the company's portfolio of assets spans four continents and includes hydroelectric, solar, wind, and energy storage. And there's more on the horizon as the company recently came to terms with TerraForm Power to acquire the remaining stake in the company, which owns and operates more than 1,800 MW of solar assets.
The company's pipeline of projects in development totals about 13,000 MW. Specifically, in terms of solar power assets, Brookfield Renewable Partners has four projects totaling 613 MW of capacity under construction. When completed, these projects are expected to generate $6 million in annualized funds from operations.
While the global economy continues to reel from the COVID-19 pandemic, investors are being reminded of how valuable a strong balance sheet is during times of crisis. In this regard, investors in Brookfield Renewable Partners can rest easy since the company maintains an investment-grade balance sheet with a stable outlook rated BBB+ by S&P Global Ratings.
Another alluring aspect of Brookfield Renewable Partners is its commitment to rewarding unitholders. From 2012 to 2020, the company has increased distributions at a compound annual growth rate of 6%, and its stated objective is to "deliver long-term total returns of 12% to 15% to unitholders annually."
Focus on the little things
After solar panels absorb sunlight and convert it to direct current, the electricity must be converted to alternating current before it can be used in one's home. This is where Enphase Energy shines, as it's the global leader in microinverter market share, shipping more than 25 million microinverters to date.
Operating independently from each other in the system, microinverters are advantageous because they don't face the same performance issues as string inverters do when an individual solar panel suffers from inferior performance. And while developing microinverters is how the company first made a name for itself, it's now gaining notoriety with its energy storage solution, Encharge.
Over the past three years, Enphase has experienced success in growing revenue, profits, and operational cash flow -- the combination of which is something that not all renewable energy companies have experienced.
ENPH Revenue (Annual) data by YCharts.
Looking to expand its offerings even more, Enphase intends to launch products for the small commercial solar market and off-grid solar and storage markets in 2020. In doing so, the company aspires to generate consistent profitability, targeting a 35% gross margin and 20% operating margin.
Say "Aloha" to this utility stock
While Florida may be known as the Sunshine State, it's Hawaii that's concentrating its efforts on solar power. Committed to sourcing 100% of its power needs from renewable sources by 2045, Hawaii is working to reduce its reliance on fossil fuels.
Consequently, its utility, Hawaiian Electric, offers investors another way in which they can power their portfolios with the sun. Named " 2019 Utility of the Year" by Utility Dive, a leading energy industry publication, Hawaiian Electric provides electricity to 95% of the state's residents on various islands: Oahu, Maui, Molokai, Lanai, and the island of Hawaii.
In 2019, the utility completed development of four solar projects totaling 130 MW of capacity, and it has two projects under construction, totaling 8.5 MW of capacity, which are expected to be completed in 2020. Having received approval from regulators, Hawaiian Electric has eight solar and battery storage projects in development, which are expected to begin operations between 2020 and 2022. In total, the eight projects represent 262 MW of solar power capacity and 1,053 megawatt hours of battery storage.
For investors who are seeking a reliable dividend stock in addition to one that's solar-oriented, Hawaiian Electric is a compelling choice. The utility has been paying an uninterrupted dividend since 1901.
HE Dividend data by YCharts.
Over the past three years, the company has managed to raise its payout to shareholders without jeopardizing its financial health as it simultaneously reduced its payout ratio.
Set your sights on these sunny stocks
Long gone are the days when coal reigned as king. Nowadays, renewable energy sources are assuming a more prominent position in our energy landscape, affording investors an opportunity to prosper from green energy-affiliated companies.
In regards to solar power, there's a range of opportunities from which to choose. More conservative investors -- who also have their eyes on dividends -- may find Brookfield Renewable Partners and Hawaiian Electric as two potential additions to their portfolios. Investors more willing to take on risk, however, will find that Enphase Energy is a compelling choice as it expands its offerings and seeks to gain wider exposure in the commercial solar and energy-storage markets.
