When policymakers and the media mention the shift from fossil fuels to renewable energy sources, the discussion is always focused on costs and sacrifices. It’s true that shifting the world to greener energy will need a tremendous investment, but for savvy investors, that’s the perfect opportunity.
According to experts, the combination of consumer demand, regulations, and shifting cost structures is pushing some of the world’s largest energy producers to cleaner sources. This market was already worth $1 trillion in 2018 and could be worth as much as $1.5 trillion by 2025.
Companies that spend the next decade deploying cash and accumulating assets in this sector will reap tremendous rewards when the market matures. Here are some of the leading green energy stocks Canadian investors should consider.
Accumulating $10 billion in renewable power-generating assets is no small feat, but Northland Power (TSX:NPI) has done just that over the past 32 years. The company’s wind, thermal, and solar projects now span from Mexico to Taiwan.
With a market capitalization of $4.5 billion, it’s one of the largest pure-play green energy stocks on the Canadian stock market. It’s also one of the most lucrative dividend stocks — delivering a 4.78% yield at the current market price. My Fool colleague Victoria Hetherington calls it a “safe” dividend alternative to cheap oil stocks.
Quebec-based Boralex (TSX:BLX) is another safe green energy dividend stock, albeit with lower yield. The stock currently offers investors a 3.58% dividend income at its current price. However, the company pays out less than 30% of its annual earnings and invests the rest in bolstering the renewable assets and creating long-term value.
I believe Boralex strikes a fine balance between capital appreciation and income, but there are better options on this list.
Not only has TransAlta Renewables (TSX:RNW) accumulated one of the largest green energy portfolios in the country, but it has done so while maintaining one of the most lucrative and stable dividends on the Canadian stock market.
Over six years, management has maintained the payout ratio at 80-90% of net earnings, and the stock currently delivers a 6.9% dividend yield, making it the perfect addition to an income-seeker’s portfolio.
My favourite green energy stock, Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP), has delivered a jaw-dropping 34% return since the start of this year. Despite the spike, it’s still one of the most lucrative dividend stocks on this list, offering a 6.4% dividend yield.
The parent company is one of the largest and most experienced asset managers in North America, which puts the green energy firm in a uniquely advantageous position. Brookfield can strike better deals, survive deeper recessions, and deliver magnified economies of scale when compared to independent clean energy players.
Utility companies have been a source of stable passive income for millions of investors for decades. However, the industry is changing, and it seems likely that those who neglect the need for renewable assets will be left behind.
The passive-income source of the future probably lies in a combination of the stocks I’ve mentioned here.
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share. Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune. Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
Fool contributor Vishesh Raisinghani has no position in any stocks mentioned. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.