As the demand for green energy continues to increase, I see good growth opportunities for the companies that have scaled their businesses in this space. Further, the near-term challenges related to the COVID-19 pandemic, including reduced power demand, is expected to dissipate soon with the vaccine distribution and the economic reopening.
With that in mind, we’ll focus on three top green energy stocks that could deliver strong returns over the next decade. Further, these companies could continue to boost your returns through consistent dividend payments.
Power producer Northland Power (TSX:NPI) has a solid track record of delivering impressive returns to its shareholders. Over the last five years, Northland Power has delivered an average annual total shareholder return of 24%, which is encouraging.
Northland Power’s strong returns are backed by its growing asset base and operating capacity expansion. From 2014 to 2020, Northland Power’s assets have increased at an annual growth rate of 18%. Meanwhile, its operating capacity has grown at an average annual rate of 14% during the same period.
Northland Power’s adjusted EBITDA and free cash flow per share have grown at a healthy pace, thanks to its regulated and contracted assets. Meanwhile, the momentum is likely to sustain in the coming years.
The company’s diversified assets, geographic expansion, opportunistic acquisitions, and ability to deliver consistent returns makes it one of the top green energy stocks that should be a part of your portfolio. Thanks to its strong earnings base, Northland Power has uninterruptedly paid dividends since 1998 and offers a yield of over 2.5%.
Brookfield Renewable Partners
The company’s high-quality and diversified assets, large scale, and resilient business position it well to consistently deliver impressive returns. Its output is backed by long-term power-purchase contracts that include inflation indexation.
Thanks to its predictable and growing cash flows, Brookfield Renewable Partners raised its dividends at a CAGR of 6% over the past 20 years. Meanwhile, it projects a 5-9% increase in its dividends in the coming years.
Its stock has surged over 86% in one year. Meanwhile, its strong developmental pipeline, diversified assets, and robust balance sheet suggest that the company could continue to deliver stellar returns in the coming years.
Innergex Renewables Energy
Innergex Renewables Energy (TSX:INE) is a relatively smaller player in the green energy space. However, its diversified and young asset base and long-term contracts position it well to deliver strong returns. Further, its accretive acquisitions accelerate its growth and drive its stock higher.
With the remaining weighted average life of its power purchase agreement of 14.4 years, production growth, and a strong developmental pipeline, Innergex Renewables is expected to deliver impressive revenues and adjusted EBITDA over the next decade. Further, the company is likely to enhance its shareholders’ returns through higher dividend payments.
Innergex stock has risen about 62% in one year and offers a decent yield of 2.5%.
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 Sneha Nahata has no position in any of the stocks mentioned.