Forget Oil: Buy This Skyrocketing ESG Stock!

The ESG investment movement is growing faster and faster. Take advantage by owning this growing ESG renewable stock trading on the TSX.

| More on:
Solar panels and windmills

Image source: Getty Images

Utility stocks on are not really owned for growth. They are owned for stability, consistency, and dividends. They are boring stocks to own, but that is why every investor should own them. Regulated utilities are especially great to own in bear markets, because they provide a shelter of dividends and capital preservation for investors. The only problem is, they can seriously lag once the market turns bullish again.

Fortunately, there is a new breed of utilities. You might even call them “growtilities.” With a focus on clean power and renewable energy, they are breaking the stigma that utilities are “boring.”

The renewable trend is only beginning

Global warming is now a serious concern to investors. Many institutional investors are moving investment strategies away from carbon-emitting sectors (like fossil fuel production, industrials, and mining) to those that are sustainable and environmentally proactive.

In January, Blackrock, the world’s largest asset manager, announced that ESG (environmental, social, and governance) principals have become the new investment criteria for all its investments. This is just the tip of the melting iceberg. Going forward, we can expect to see a lot more institutional money depart from oil stocks into renewable and ESG-orientated sectors.

Northland is more than just a utility stock

One renewable energy stock that will benefit from this trend is Northland Power (TSX:NPI). It owns, operates, and develops sustainable, green power infrastructure across Canada, South America, Europe, and Asia.

61% of Northland’s adjusted EBITDA is derived from offshore wind farms, 20% is from natural gas/biofuel plants, 8% is from a regulated utility, 6% is from solar operations, and 5% is from on-shore wind farms. Overall, the company produces over 2.6 GW of green energy.

Northland is expanding across the world

Northland has acquired a particular level of expertise in developing off-shore wind farms. It has already developed three wind farms in Europe and is expanding significantly in Asia.

Currently, Northland has a 60% stake in a 1,044 MW development in Taiwan. It has a partnership to develop 600 MW in Japan. Lastly, it just purchased a South Korean off-shore power developer that creates an additional 1,000 MW of development opportunities.

Many coastal countries in Asia lack natural resources like coal or natural gas. Clean assets, like off-shore wind, are attractive and affordable power options. Yet building wind power projects in the middle of the ocean is not exactly easy. It requires specific developmental and operational expertise. Fortunately, Northland has established this expertise, and it can now deploy projects more efficiently across the globe.

Northland’s stock has produced electric returns

Accordingly, Northland has a nice growth runway for many years to come. If its past record is any indication of the future, investors should be pretty excited. The stock has produced some impressive returns.

Since 2015, adjusted EBITDA and free cash flow per share have increased 145% and 75%, respectively. In that same period, Northland’s stock rose 90%. Combine that with dividends, and that is a sweet 15% average return.

Today, the quality of Northland’s cash flow is better diversified and more consistent than ever. Its diverse assets, including the recently acquired regulated utility in Colombia, are creating consistent quarter-to-quarter returns for shareholders. Its global development pipeline will provide ample opportunities for expansion as the ESG trend continues.

Good for the environment and good for your wallet

Right now, Northland pays a nice 4% dividend; however, that distribution should increase soon. Firstly, its 252 MW Deutsche Bucht wind farm just became fully operational on March 31. Secondly, its Colombia utility acquisition was fully completed in January. Management has projected these assets will boost 2020 adjusted EBITDA by about 35%. Shareholders could see a nice uptick in the second half of the year.

Northland Power is a utility, but it is not a boring stock. It has income and growth, and it is helping preserve the planet. By owning this renewable energy stock, you help keep the planet green, and you get to enjoy a growing pile of green (money) in your pocket. You can’t really ask for much more from this TSX renewable energy stock.

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 Robin Brown owns shares of NORTHLAND POWER INC.

More on Dividend Stocks

worry concern
Dividend Stocks

Worried About a Recession? 2 Canadian Blue-Chip Stocks to Buy and Hold for Dear Life

A recession is worrisome. Buying two blue-chip TSX stocks and holding them for the long term will deliver stable, less…

Read more »

money cash dividends
Dividend Stocks

TFSA: 3 of the Best Canadian Dividend Stocks to Buy This Year

Are you looking for some of the best Canadian Dividend stocks to buy this year? Here are three great options…

Read more »

Man data analyze
Dividend Stocks

2 Recession-Tough Stocks to Buy in February 2023

TSX stocks, such as Jamieson Wellness, are trading at compelling valuations and might deliver stellar gains to investors.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

Defensive Investors: 3 Stocks to Shore Up Your Portfolio

Fortis is a defensive stock with an impressive track record.

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

Passive Income: 2 Cheap Stocks to Buy and Never Sell

Buying dividend stocks cheap and discounted is a strategy many value investors pursue to maximize the return potential.

Read more »

Female friends enjoying their dessert together at a mall
Dividend Stocks

Dividend Stocks: Will Debt Load Put a Damper on This Top Stock in 2023?

This dividend stock has a very solid track record of revenue and cash flow growth, ,as well as dividend growth,…

Read more »

A plant grows from coins.
Dividend Stocks

How to Invest in One of the Most Important Commodities in the World (It’s Not Gold)

Many things we take for granted may offer economic value and a powerful investment opportunity beyond commodities like gold or…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Need Passive Income? Turn $15,000 Into $1,016 Annually With These 2 Dividend Stocks

Canadian investors with limited capital can create passive-income streams from two high-yield dividend stocks.

Read more »