Financial performance of renewable energy companies has often been erratic. Be it rooftop solar or fuel cells, renewable energy space is still evolving. However, that does not mean that there are no steady performers in this emerging segment. Let's look at three renewable energy stocks that you can buy and hold for the long term.
Brookfield Renewable
Energy and power sectors are estimated to account for roughly 75% of global greenhouse gas emissions. Increasing power generation from renewable sources is thus a key focus area to reduce greenhouse gas emissions. One of the world's largest companies in renewable power is Brookfield Renewable (BEP -1.66%) (BEPC -0.89%). It has assets across hydro, wind, and solar sectors.
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Brookfield Renewable has 8 gigawatts of hydroelectricity assets, 5 GW of wind power generation assets, and 2.2 GW of solar assets. The company is increasing its focus on solar power and has roughly 17.3 GW of solar assets under development. In all, Brookfield has roughly 20 GW of renewable generation assets. Moreover, the company's generation capacity will more than double with its 31.4 GW of development pipeline.
Since 2012, Brookfield Renewable has invested $7 billion in renewable power projects. More importantly, the company grew its per-share normalized funds from operations by a compound annual growth rate of more than 10% between 2010 to 2020.
Brookfield Renewable rewarded its shareholders with distributions growing at a CAGR of more than 6% in the last decade. With its strong projects pipeline and expected growth in the use of renewable energy, Brookfield Renewable looks set to continue growing its distributions in the coming decade, too. The stock offers a dividend yield of slightly above 3% as of this writing.
NextEra Energy Partners
NextEra Energy Partners (NEP -1.49%) is a limited partnership formed by NextEra Energy (NEE 0.51%) to take advantage of trends in the U.S. energy industry. There is an increasing demand for renewable energy from utilities to meet state RPS (Renewable Portfolio Standards) requirements. NextEra Energy Partners focuses on long-term contracted renewable power projects, which generate stable cash flows.
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NextEra Energy Partners has a renewables portfolio of around 6.2 GW. Acquisitions from parent NextEra Energy is a key source of growth for NextEra Energy Partners. Energy Resources, which is NextEra Energy's renewable business segment, has a renewables portfolio of around 16 GW, in addition to a backlog of 15 GW. Moreover, it has potential growth projects of nearly 12 GW. Potential acquisitions from Energy Resources thus provides visibility to NextEra Energy Partners' growth.
NextEra Energy Partners has doubled its distributions in five years. The company expects to grow its per unit distributions by an average annual rate of 12% to 15% through 2024. Overall, NextEra Energy Partners is a great stock to buy and hold for the next decade.
Algonquin Power & Utilities
With two-thirds of earnings derived from regulated electric, gas, and water utilities, Algonquin Power & Utilities (AQN -0.32%) isn't a renewable-only company. But it derives a solid one-third of its earnings from renewable generation. Algonquin has a renewable generation capacity of around 2.3 GW. It plans to spend $3.1 billion on renewable energy projects through 2025. The company intends to maintain the current mix between its regulated utilities operations and renewable energy operations.
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Algonquin Power & Utilities' renewable energy contracts have an average remaining length of 13 years. Long-term contracted assets generate steady cash flows for the company, which in turn allow it to raise its dividend steadily.
Over the last decade, Algonquin Power & Utilities grew its dividend at a compound annual growth rate of around 10%. The stock is trading at a dividend yield of 4.2% as of this writing. The company's planned projects should continue fueling its dividend growth in future, too. Algonquin Power & Utilities' steady cash flows and dividend growth make it a stock to buy and hold for the long term.
