Predicting what the world will look like, even a few years from now, is proving to be more and more difficult. But there’s one trend that appears likely to prevail, regardless of what a post-pandemic world looks like.
One of those is the movement towards cleaner sources of energy and producing less pollution in the world. And in that respect, the two stocks below look to be solid investments to hang on to as their values can soar as demand shifts to more environmentally friendly products and services.
NFI Group
NFI Group (TSX: NFI) makes buses and is focusing on making them more efficient. From zero-emission electric to hybrid to clean diesel and to natural gas, the company’s buses and motor coaches have a variety of different drive systems available. The company’s operations are global with a presence in 10 countries. NFI supports more than 105,000 buses and coaches.
The company’s been growing steadily over the years with revenue of US$2.9 billion in 2019 rising by 14.8%. The year before that, NFI’s sales grew by just 5.8% to US$2.5 billion. And things haven’t gotten any easier amid the pandemic, as NFI reported sales of just US$333.3 million its most recent results, which went up until the end of June. That’s down 51% from the prior-year period. The company also swung to a net loss of $74.1 million after posting a profit of $8.5 million a year ago.
It’s still a long road ahead for the company and its greener vehicles. And COVID-19 may push priorities like electric buses for cities down the list. Shares of NFI are down 38% so far in 2020, making the stock a cheap buy, as it’s now trading right around its book value. Despite the challenges ahead, NFI continues to pay a dividend, which today yields 5.1%.
TransAlta Renewables
TransAlta Renewables (TSX: RNW) operates power-generating facilities throughout North America and even in Australia. The company has a wide range of wind, hydroelectric, natural gas, and solar facilities in its portfolio. But like NFI, it’s going to take a while for TransAlta to realize its value, as consumers slowly transition over the greener energy sources.
The company’s even seen more challenges in growing its sales over the years. In 2019, NFI generated revenue of $446 million, which was down 3.5% from the previous year. And in 2018, sales of $462 million were flat, showing minimal difference from the $459 million in revenue that TransAlta recorded in 2017. While long-term contracts help give TransAlta investors some consistency, there simply hasn’t been much in the way of growth in recent years.
In its most recent results, which were up until June 29 and included lockdown months due to COVID-19, sales of $103 million declined by a relatively modest 7.2% from the prior-year period. Net income of $31 million was down slightly from the $32 million in profit TransAlta posted a year ago.
Like NFI, TransAlta compensates investors for their patience with a great dividend. The company currently pays a monthly dividend of $0.07833, which yields over 6% on an annual basis. The stock has been a fairly stable this year and is currently trading right around where it was at the start of the year at over $15 per share.
