The global economy is slowly changing energy sources, moving away from fossil fuels to renewable energies.

This transition to clean energy will take billions of dollars and many decades. However, it has the potential to save investors a lot of money. Here’s a look at how to invest in this exciting industry and some of the top renewable energy stocks to watch out for.

Main renewable energy stocks

Here is an overview of some strengths of the alternative energy sector.

1. Brookfield Renewable Partners

Brookfield Renewable Power (NYSE: BEP) (NYSE: BEPC) is one of the largest publicly traded renewable energy companies in the world. It operates a global multi-technology platform that includes hydroelectric, wind and solar power generation facilities as well as energy storage assets.

Brookfield sells most of the power it generates under long-term fixed rate power purchase agreements (PPAs). These contracts provide him with a stable cash flow, which he uses to pay an attractive dividend and invest in expanding his portfolio. The company also benefits from a strong balance sheet with one of the highest blue-chip bond ratings in the renewable energy industry, as well as plenty of liquidity – cash and available credit – to help fund growth.

According to Brookfield, it has the financial capacity to invest $ 800 million to $ 1 billion per year in expanding its renewable energy portfolio through 2025, with a focus on new developments in the ‘solar energy. These investments are expected to fuel annual growth in cash flow growth per share of 11% to 16%, supporting annual increases in its dividend from 5% to 9%.

By leveraging its strong financial profile to expand its solar power platform, Brookfield should have the power to continue to deliver strong returns on investment over the next several years.

2. First solar

First solar (NASDAQ: FSLR) is one of the leaders in the development of thin film solar panels. These larger modules produce electricity at a lower cost per watt than traditional silicon-based panels. They also work best in hot, humid conditions and clear snow and debris faster. These characteristics make them ideal for large scale applications.

One of the factors that sets First Solar apart in the panel manufacturing industry is its strong balance sheet. The company regularly has a large net cash position, which provides it with interest income. Most of its competitors, on the other hand, have a lot of debt on their balance sheets and therefore pay interest to third party lenders. The financial strength of First Solar not only lowers its costs, but also allows it to continue to develop its manufacturing capacity.

While First Solar does not have the stable cash flow profile of a company like Brookfield, it offers investors greater growth potential by expanding its solar panel manufacturing capacity to meet searing demand.

3. NextEra Energy

NextEra Energy (NYSE: NEE) operates two business segments:

• Rate-regulated electricity utilities that deliver electricity to consumers and businesses
• A competitive energy segment that produces electricity and transports natural gas under long-term fixed-price agreements

These entities combine to produce more energy from wind and sun than any other business in the world. They also generate stable cash flow, which provides NextEra with money to pay dividends and invest in expanding its operations.

NextEra complements its stable operations with one of the highest credit ratings among the largest electric utilities. It also monitors the performance of renewable energies NextEra Energy Partners (NYSE: NEP), which provides additional investment capacity as it can sell contracted clean energy assets to its subsidiary for cash to reinvest in new opportunities.

The company has the financial capacity to invest tens of billions of dollars in the coming years in the development of new renewable energy projects, a considerable part of which is devoted to solar energy. These investments are expected to result in earnings growth of at least 6% to 8% per year through 2023 while allowing NextEra to increase its dividend by around 10% per year through at least 2022. These dual growth engines should provide NextEra with the power to continue to generate market. beat the total return of stocks in the years to come.

How fast are renewable energies developing?

Renewable energy is growing at an exponential rate. According to the International Energy Agency (IEA), renewable energies reached 30% of the world’s electricity production capacity in 2020. IEA sees renewable energies overtake coal to become the largest source of production electricity in the world by 2025, providing a third of the world’s electricity.

The IEA sees the brightest future for solar energy, predicting that this technology will fuel the majority of this growth. In most countries, solar power is expected to be cheaper than newer coal or gas-fired power plants, as new solar projects currently offer some of the cheapest electricity ever. . The IEA also sees a bright future for wind and other low-carbon energy sources as the global economy shifts to a cleaner future.

However, financing is one of the potential headwinds for the development of clean energy. It takes more investment than available capital, which is both a challenge and an opportunity.

How to find good investments in renewable energy

Renewable energy companies that generate free cash flow and have strong balance sheets have a competitive advantage over their financially weaker rivals, as they have better access to the capital needed to finance growth. That is why investors should focus their attention on financially strong clean energy companies.

The growth potential of the renewable energy sector offers the opportunity for any industry-focused business to thrive. Not all will, however, because growth for growth will not make shareholders richer. Instead, investors should look for companies that wisely allocate capital to renewable energy projects that generate attractive returns on investment. Smart allocation of capital is essential to maintain a strong financial profile.

Major renewable energy stocks have a bright future

The renewable energy sector represents a huge opportunity for investors. However, investors should choose stocks carefully, as not everyone will grasp the full extent of this opportunity. Two key characteristics to look for are a strong balance sheet and a solar driven growth profile, as these factors could give a business the power to generate higher returns.

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