Wind power is a huge growth sector often overlooked in favour of oil, natural gas, and nuclear investors. However, with careful management, an investment in the top producers could see significant upside over the coming years. Today, we’ll look at a few wind energy facts and figures and review a top TSX stock that unlocks this explosive sector.
Wind energy is an all-weather investment
Concerned about the global economy? Put off by increased oil volatility? Worried about the environment but still looking for industrial growth you can rely on? Before we take a look at one of the best Canadian dividend stocks in a growth sector that ticks all of these boxes, let’s review some facts that make wind energy look like an appealing investment right now.
First of all, here’s a key percentage in wind power history: 1%. That’s roughly the amount of the world’s electricity that was generated by wind power in 2006. Now fast forward to 2017, and that percentage has shot up to 4%. While that may not seem like a lot, 400% growth in 11 years isn’t bad going for an “alternative” energy source. Industry analysts expect the percentage of total global energy by 2025 to reach 7%.
Keeping up this competitive edge is likely to be more assured in the future as auctioning overtakes traditional feed-in tariffs. In theory, this kind of bidding system will mean that wind power becomes increasingly cost competitive with lower power prices. The system has seen recent success in Europe, the Americas, India, and North Africa.
A revolutionary route to sustainable upside
As a case study in market share, let’s look at one of Europe’s biggest wind farms by installed capacity, the Gemini Offshore Wind Park. With an output capacity of 600 MW, Gemini is situated off the coast of the Netherlands and is owned by several companies, with Northland Power (TSX:NPI) having the largest stake at 60%. Gemini is the third-largest wind farm on the planet and has the capacity to offset an annual 1.25 million tonnes of CO2.
Northland pays a decent dividend yield of 4.72% at today’s price of $24.45 a share. Even trading much closer to its 52-week high than its year-long low, the stock is fairly good value compared with the Canadian renewables industry in terms of its income, though its valuation relative to assets is on the high side compared with its green-energy peers.
On a side note, the recently published World Nuclear Industry Status Report (WNISR) has signalled that renewables have the ability to outcompete nuclear power. Weighing it all up, then, Northland is one of the foremost alternative energy investments on the TSX in terms of operational capacity, market share, and growth potential, with its sector overtaking even nuclear energy in terms of outlook.
The bottom line
Investors seeking upside in the renewables space have a strong play in Northland with its mix of geographical diversification and a well-covered and tasty dividend yield. Canadians seeking to hold income-generating stocks that will grow over the long term should consider adding shares of Northland for key exposure to a rapidly expanding market that could see a boost from oil volatility.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.