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4 Leading Renewable Energy Stocks to Buy in 2021 and Beyond

By Matthew DiLallo - Sep 26, 2021 at 10:27AM

Key Points

  • These electric utilities are embracing change.
  • They expect to invest billons on building new renewable energy generating capacity over the next few years.
  • These investments should power steady earnings and dividend growth.

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The renewable energy megatrend is accelerating.

The global economy is starting to get serious about reducing carbon emissions. This decarbonization megatrend represents an enormous investment opportunity. Companies need to spend trillions of dollars per year over several decades on deploying additional renewable energy capacity to achieve net-zero emissions.

Many companies will benefit from this megatrend. Some of the emerging leaders include electric utilities Consolidated Edison ( ED 2.34% )Duke Energy ( DUK 2.28% )NextEra Energy ( NEE -0.67% ), and Xcel Energy ( XEL 0.80% ). Here's why that makes them great renewable energy stocks to buy for 2021 and beyond.

Two people in hard hats and a laptop looking at a row of wind turbines.

Image source: Getty Images.

A quiet leader in solar power

Consolidated Edison has a long history of distributing electricity and natural gas to the New York City area. That base business has steadily expanded over the years, enabling Consolidated Edison to pay one of the best dividends in the utility sector. The company has increased its dividend for 47 straight years, the longest growth streak in the industry. 

However, while the company's utility operations generate steady cash flow, what stands out about Consolidated Edison is its solar energy business. It might come as a surprise to learn that Consolidated is the second-largest solar developer in the country and seventh-largest globally. The company started by acquiring solar energy projects from other developers. It launched an internal development program in 2014 and currently has a large pipeline of opportunities to continue expanding its solar energy operations in the coming years. That should enable Consolidated Edison to keep growing its dividend, putting it on track to become a Dividend King in a few years.

Betting big on clean energy

Duke Energy set a bold goal to transform into a clean energy company, targeting net zero emissions by 2050. The utility expects to spend $59 billion on clean power generation and grid investments over the next few years to support this ambitious plan. These investments will push renewable energy to 23% of its power mix by 2030, up from 7% last year. Meanwhile, 91% of its overall power mix will come from cleaner fuel sources (natural gas, nuclear, and renewables), up from 79% last year.

Duke believes these investments will pay direct dividends for its shareholders. The company estimates it can grow its earnings per share at a 5% to 7% annual rate through 2025. That should support continued dividend growth, allowing Duke to extend its streak of raising the dividend, which it has done for the last 14 consecutive years.

Leading the charge

NextEra Energy boasts that it's the world's largest producer of wind and solar energy. However, it's still getting started. The company plans to spend up to $55 billion on new infrastructure investments through next year, which will enable it to produce even more clean power. 

The company estimates that these investments will support 6% to 8% annual earnings-per-share growth through 2023. However, the company has repeatedly said it would be disappointed if it didn't deliver results at or near the top-end of that range. In addition, it sees dividend growth of around 10% per year through at least 2022. These factors should enable NextEra Energy to continue generating powerful total returns for its shareholders.

The wind's at its back

Xcel Energy was the first electric utility to publicly pledge to deliver 100% carbon-free electricity by 2050. The company currently expects to spend $24.3 billion on capital projects through 2025, including new renewables and other grid-related investments. It has a large and growing wind business and is starting to make greater inroads into solar. In addition, it's evaluating using hydrogen as a fuel source while also helping enable the deployment of more electric vehicles.

Xcel Energy believes these investments will pay dividends for shareholders. It expects to grow its earnings per share at a 5% to 7% annual pace through 2025. In addition, it believes it can increase its dividend at a similar rate. That should enable the utility to generate attractive total returns for investors in the coming years.

Powerful growth ahead

These electric utilities are embracing a cleaner future. All four are emerging as leaders in investing in renewable energy, which should power steady earnings and dividend growth over the next several years. That makes them great renewable energy stocks to buy and hold for the long term.

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.

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Stocks Mentioned

NextEra Energy, Inc. Stock Quote
NextEra Energy, Inc.
NEE
$88.03 (-0.67%) $0.59
Consolidated Edison, Inc. Stock Quote
Consolidated Edison, Inc.
ED
$80.53 (2.34%) $1.84
Duke Energy Corporation Stock Quote
Duke Energy Corporation
DUK
$99.88 (2.28%) $2.23
Xcel Energy Inc. Stock Quote
Xcel Energy Inc.
XEL
$65.17 (0.80%) $0.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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