3 Renewable Energy Companies With Big Yields

Looking to diversify your energy risk? Check out Just Energy Group Inc. (TSX:JE)(NYSE:JE), Innergex Renewable Energy Inc. (TSX:INE), and Hydro One Ltd. (TSX:H).

| More on:
The Motley Fool

The collapse in energy prices has brought down many companies in the sector. Renewable energy producers, however, many of which sell their power at regulated rates and volumes, still have the same cost of production and profitability levels. It’s a great advantage to have when the rest of your industry has to deal with volatile prices.

Here are three renewable companies with juicy yields to consider.

Years of proven success

While many believe that renewable energy isn’t ready for the limelight, Just Energy Group Inc. (TSX:JE)(NYSE:JE) has proven that wrong with 18 consecutive years of net customer additions. Today it has roughly 4.6 million total customers. At $3.9 billion in annual sales, the company claims it supplies nearly 2% of North America’s total electricity consumption.

The company’s JustGreen Power product makes it possible for customers to get 100% of their electricity from renewable sources. Increasing consumer demand for services like this has led to substantial margin growth.

New commercial customers were signed at an $84 annual margin last quarter, up from $80 a year ago. Meanwhile, new residential customers were signed at a $209 annual margin, up from $188 a year ago. Increasing demand and profitability should help EBITDA to grow 20% in 2016.

With a sustainable 5.5% dividend, shares are great blend of both growth and income opportunities.

A hydroelectric giant

Innergex Renewable Energy Inc. (TSX:INE) is an independent renewable-power producer based in Quebec. Roughly 70% of its production comes from hydro projects, 20% from wind, and the remainder from solar. Production is diversified across three provinces and one U.S. state. Multiple energy sources in several regions reduce its exposure to variability in water, wind, and solar regulations in any one market.

The company claims that demand for its production is driven by strong support for decarbonization in addressing climate change, a desire to diversify sources of energy, and the retirement of conventional power plants. In its regions of operation, renewable generation is expected to grow 45%, or 5.4% per year, to 2020.

This growth is clearly resulting in substantial profits. EBITDA last year was $180 million, up from $68 million in 2010. Over the same period free cash flow grew to $69 million from just $39 million.

Now paying a 5.2% dividend, Innergex is a great option for income-oriented investors looking to diversify their energy exposure.

Valuing stability

Possibly the most reliable company on this list, Hydro One Ltd. (TSX:H) is focused on fully rate-regulated environments, representing 99% of its overall business. Like any other regulated utility, this provides a predictable growth profile, including rate-based additions and pre-approved price increases.

With no direct exposure to electricity-price fluctuations (as the cost of electricity is passed on directly to consumers), Hydro One has a limited risk profile along with the highest credit rating in the industry.

The company is fairly underfollowed, given the fact that it just IPO’d in November. With a 70-80% targeted dividend-payout ratio, its initial dividend is expected to be about $0.84. That would result in a 3.7% yield. While that’s outpaced by the other companies on this list, it is certainly the safest.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. 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, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

More on Dividend Stocks

Dividend Stocks

TFSA: How to Invest $88,000 to Get $5,450/Year in Passive Income

Top TSX dividend stocks such as Enbridge can be held in your TFSA to benefit from steady payouts and capital…

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Cheap Dividend Stocks (Down Over 30%) to Buy in January 2023

Given their discounted stock prices and high yields, these three cheap dividend stocks could be attractive for income-seeking investors.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

TFSA Investors: Earn Passive Income With 3 Blue-Chip Stocks

TFSA investors can worry less about a recession and earn passive income with three blue-chip stocks as core holdings.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

Is Now the Right Time to Buy Consumer Discretionary Stocks?

Investors cannot paint consumer discretionary stocks with a wide brush. Each stock must be investigated individually. Here's why.

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Ultra-Stable Canadian Stocks Just Crowned as Dividend Aristocrats for 2023

Waste Connections (TSX:WCN) stock and another Dividend Aristocrat could help investors crush the markets in 2023.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Create $200 in Passive Income Every Quarter From 1 Defensive Stock

Risk-averse investors can seek safety in a defensive stock and earn more in passive income in 2023 and beyond.

Read more »

railroad
Dividend Stocks

Slow and Steady: Buy this Railroad Stock Now to Win the Race

Investors looking for a solid and growing income should pick up shares in this railroad.

Read more »

retirees and finances
Dividend Stocks

RRSP Investors: Should You be Worried During a Recession?

RRSP savers might feel like gagging as they watch their investments fall, but stay strong! Especially with these TSX stocks.

Read more »