In late December, the consultancy group Wood Mackenzie published some forecasts for the energy sector in 2020. The most pertinent prediction for our interests today was its projection of higher stock prices for companies with production that is less harmful for the environment. Wood Mackenzie also predicts record installation of solar powers this year.
There has been frustration with Canada’s green energy development, with some activists pressing for a more aggressive strategy from the ruling Liberals. The Liberals have laid out a plan to get Canada to net zero emissions by the year 2050, and pledged to halve taxes for companies that develop zero-emissions technology.
Today I want to look at two stocks for companies that are operating in the renewable energy sector. Both are well worth targeting to start this decade.
TransAlta Renewables (TSX:RNW) is a Calgary-based company that is engaged in renewable power generation. Shares have climbed 50% year over year, as TransAlta put together a terrific year on the market in 2019. However, the stock has fallen marginally to start this year.
Investors can expect to see the company’s fourth-quarter and full-year results for 2019 in February. In the third quarter of 2019, TransAlta reported adjusted funds from operation of $69 million compared to $67 million in the prior year. So far in fiscal 2019, the company closed the acquisition of the Antrim wind project, and continued construction on Big Level, the 90 MW wind project in Pennsylvania that has a 15-year PPA with Microsoft.
The stock last paid out a monthly dividend of $0.07833 per share, which represents a strong 6% yield. Shares still possess a price-to-earnings ratio of 18 and a price-to-book value of 1.8, which puts it on solid footing value-wise as it is priced near a 52-week high.
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Innergex Renewable (TSX:INE) is a Quebec-based developer, owner, and operator of run-of-river hydroelectric facilities. Its stock has increased 28% year over year. It is also expected to unveil its Q4 and full-year results for 2019 late next month.
The company released a very strong third quarter in November. Revenue from continuing operations rose 23% from the prior year to $142.8 million and revenues proportionate was up 19% to $179.8 million. Adjusted EBITDA from continuing operations climbed 28% to $107.4 million.
Innergex still has a big year ahead. In 2019 it completed the commissioning of its largest wind farm to-date and later in November commissioned the largest solar project in Texas.
Innergex is well-positioned with a strong financial position and several promising projects in the pipeline. The stock last paid out a quarterly dividend of $0.175 per share. This represents a solid yield of 4.1%, though it that cannot quite measure up to TransAlta.
Shares are trading close to a 52-week high, and investors will be paying a premium for Innergex right now as it possesses a sky-high price-to-earnings ratio over 80. Value investors may want to wait for a more attractive entry point, but this is a stock that is positioned to provide growth and steady income over the next decade.
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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.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft.