Clean energy stocks are riding a wave of momentum as wind, solar, energy storage, and now hydrogen become the biggest growth segments in the energy industry. And investors can get in on the action in a number of ways.
SunPower (SPWR +0.00%) is in the business of putting solar panels on rooftops and attaching energy storage systems, while Brookfield Renewable Partners (BEP 2.11%) invests billions in clean energy power plants, and Hannon Armstrong (HASI 0.92%) finances everything from efficiency improvements to wind farms. And that's why these are three great clean energy stocks to buy today.
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SunPower
SunPower is one of the market leaders in rooftop solar and attached energy storage. As more homes and businesses go solar, this should be one of the renewable energy stocks that's able to grow long-term. The company has also transformed itself from a leveraged manufacturer of solar panels to an asset-light service provider with value rather than debt on the balance sheet.
If we look at the end of the most recent quarter, SunPower had net debt of $285 million on the balance sheet, $511 million of Enphase Energy stock, and $211 million in net retained value of solar projects. Retained value is an estimate of the present value of all future cash flows from contracted solar projects minus debt, which isn't properly accounted for on the balance sheet. It total, there is net positive value of $437 million on the balance sheet with all of these assets and debt considered.
That's a solid foundation to build on, and SunPower is expecting to grow rapidly coming out of the pandemic. 2021 revenue growth is expected to be 35%, and EBITDA is expected to triple from $40.1 million in 2020 with an additional 40% growth in 2022 to at least $168 million.
If we take SunPower's market cap of $5.07 billion and subtract the $437 million of value on the balance sheet, we get the market valuing the company's operations at $4.63 billion. That's 27.6 times management's 2022 EBITDA guidance. That's not cheap for an energy stock, but if SunPower can continue to grow its business and expand margins, this could be a long-term winner in the solar industry.
And now that this is a company focused on renewable energy solutions and not solar panel manufacturing, I think the future looks bright for this stock.
Brookfield Renewable Partners
One of the most consistent renewable energy power companies in the world is Brookfield Renewable Partners. It's an owner of wind, solar, hydro, and storage assets and has been a consistent dividend payer for more than two decades.
The foundation of Brookfield Renewable Partners has long been hydropower plants, but in the last few years it has added wind and solar rapidly, and the company now has more solar and wind assets than hydro.
Management says its "investment objective is to deliver long-term annualized total returns of 12%–15%, including annual distribution increases of 5–9% from organic cash flow growth and project development." Since 1999, the company has grown its dividend by 6% annually on a compound basis, so it has a history of growing the way it plans. With a dividend yield of 4.6%, this is a relatively high-yield stock with a lot of growth opportunities ahead.
Hannon Armstrong
One of the most unique renewable energy companies today is Hannon Armstrong. The company finances everything from the land under wind turbines to efficiency improvements in government buildings. And it's that flexibility that's a feature in the company's success.
Results can be choppy, but you can see below that revenue, net income, and dividend have grown steadily over the past decade. That's a testament to the company's long-term returns from investing in renewable energy projects.
HASI Revenue (TTM) data by YCharts
Hannon Armstrong doesn't have the highest dividend yield at just 2.5%, but it does have more flexibility than most renewable energy companies to invest where returns are best. Sometimes that's in wind, sometimes in solar, and sometimes it's in efficiency projects. This is how the company has found new and innovative ways to make investments with solid returns and relatively low risk. As renewable energy grows, Hannon Armstrong is likely to play a key role in the industry's success.
Riding a wave of growth
Tailwinds are behind the renewable energy industry, and that should help all of these companies grow in the future. SunPower is the one developer that could outperform simply by expanding its asset-light business model across North America. But as finance companies, Brookfield Renewable Partners and Hannon Armstrong are able to generate growing dividends by financing clean energy projects, a key component in making this industry successful.
