After a dud of a 2021, renewable energy stocks are back on investors' radar. The Russia-Ukraine conflict had had a major role to play in this, as it drove prices of fossil fuels to dizzying heights and triggered such an energy crisis that more nations than ever are now keen to reduce dependence on fossil fuels and adopt renewable energy instead to secure their future energy needs.
Truth is, even before the war struck, renewable energy was silently changing the face of the global energy sector. To give you an example, did you know that renewable sources of energy accounted for 100% of electricity capacity additions in the U.S. in the first quarter this year, up from barely 30% in 2010?
This chart is just one of the many that gives us an idea about the exponential growth ahead for renewable energy and companies making the right moves to corner niche parts of the industry. Investing in shares of these companies is one of the best ways to make money off the renewable energy megatrend. Here are two such renewable energy stocks you'd want to buy now for 2022 and beyond.
The no-brainer stock to build wealth from renewable energy
You probably know how resilient utilities are to economic downturns and inflation, but what's even more important to know is that traditional utilities are also rapidly falling out of favor. The industry is changing, and utilities are now setting ambitious clean energy goals to decarbonize. Your best bet now, of course, will be an established utility that's also killing it in renewable energy. NextEra Energy (NEE -0.54%) is the perfect pick.
NextEra Energy, in fact, owns the largest regulated electric utility in the U.S. and is the world's largest producer of wind and solar energy. There are three reasons NextEra Energy makes for a no-brainer renewable energy stock to buy: its clout in the industry, confidence in its earnings growth through 2025, and dividend growth.
So through 2025, NextEra Energy expects to grow its adjusted earnings per share by 6%-8% off 2022 base, and increase annual dividend per share by 10% through "at least" 2024. Here, you must know that the company has grown its dividend at a compound annual growth rate (CAGR) of nearly 10% since 2006, and that dividend growth has added significantly to shareholder returns over the period.
NextEra Energy's renewable energy arm expects to build up to 30 gigawatts of capacity between 2021 and 2024, which nearly equals its existing renewable energy capacity in operation! With NextEra Energy shares dropping nearly 15% in April so far, it's an opportunity not to be missed.
Big opportunities in hydrogen
Bloom Energy builds fuel cell energy servers that generate electricity from renewables and can supply uninterrupted power. Having a reliable power backup that uses renewables is a compelling idea, and it's no wonder that some of the world's largest companies are already using Bloom Energy's products.
Since its initial public offering, or IPO in 2018, Bloom Energy's revenue has grown at a CAGR of 28%, and the company even generated a gross margin of 22% in 2021. Bloom Energy, in fact, ended 2021 with record backlog and development pipeline, and is inching closer to profitability. It expects to generate positive cash from operations this year.
All of these are signs that the green hydrogen business, although still in its nascent stage, can be commercially viable. Bloom Energy is one of the best players in the hydrogen space. Last year, the company also launched an electrolyzer with claims to produce clean hydrogen 15%-45% more efficiently than existing products in the industry. Bloom Energy expects to start shipping this electrolyzer later this year, and expects heavy manufacturing industries to find value in the product.
Some expect green hydrogen to become a multitrillion-dollar market by 2050. Even if it reaches anywhere close, Bloom Energy will have likely grown leaps and bounds by then. Beyond speculation though, Bloom Energy expects to generate $15 billion to $20 billion in revenue by 2031 compared with barely $1 billion in 2021. That's huge, and exactly the kind of growth you'd want to bet on if renewable energy stocks are on your radar.