This Renewable Energy Stock Has it All

Picking the right renewable energy stock for your portfolio can provide years of growth and income-earning opportunities.

| More on:
Solar panels and windmills

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Renewable energy stocks continue to gain in popularity. Incredibly, just a few years ago, renewable energy was seen as inefficient and expensive. Fortunately, that stereotype no longer applies. If anything, there are now plenty of superb renewable energy opportunities on the market to invest in. One such example is TransAlta Renewables (TSX:RNW). Here’s why this could be the renewable energy stock for you.

All about TransAlta

The first thing to note about TransAlta is that the company is well diversified. TransAlta has a balanced portfolio of facilities that are located across Canada, the U.S., and Australia. In total, the company operates 44 different sites across those regions, which include gas, hydro, solar, and wind elements. Collectively, those facilities boast a total generating capacity of 2.5 GW.

One point that is often overlooked by investors is that TransAlta has a similar business model to that of its fossil fuel-burning peers. In short, the facilities are bound by long-term contracts that provide the company with a stable and recurring source of revenue. Further to this, many of those regulatory contracts have an expiration that is at least a decade out. This makes investing in renewable energy stocks like TransAlta a lucrative long-term option.

Further to that, unlike many of its traditional peers, TransAlta is actively investing in growth. This is another overlooked factor worth mentioning. In short, the world is transitioning over to renewables. Traditional utilities are being forced to shift over to renewables at a very high cost. When it comes to a renewable energy stock such as TransAlta, the company’s portfolio is already renewable. This means that the company can (and will) invest in growth initiatives. By way of example, earlier this year, TransAlta announced the acquisition of a 300 MW wind farm.

In terms of performance, the stock is up over 40% in the past two-year period. This might cause some potential investors to wait for an opportune moment to buy, but that shouldn’t change the long-term outlook on this renewable energy stock.

This also means that renewable energy investments like TransAlta have a unique defensive appeal. This factor alone makes the stock a good investment for any portfolio, but there’s still more.

Earnings potential

In terms of a dividend, TransAlta offers investors a juicy dividend with a yield of 4.74%. The company pays out on a monthly basis, which is a key differentiator over its fossil fuel peers. To put that earnings potential into perspective, a $35,000 investment will provide $138 per month in income. That income potential can quickly rise further if those dividends are re-invested.

In other words, TransAlta is a renewable energy stock to buy and hold for long-term gains. Buy it, hold it, and get rich.

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 Demetris Afxentiou has no position in any of the stocks mentioned.

More on Dividend Stocks

energy oil gas
Dividend Stocks

2 High-Yield Energy Stocks to Buy as Recession Approaches

Energy stocks such as TC Energy and Canadian Natural Resources allow investors to generate income even in recessionary times.

Read more »

green power renewable energy
Dividend Stocks

3 Top Dividend Stocks to Drive Your Passive Income

These three high-yielding, safe dividend stocks could boost your passive income.

Read more »

protect, safe, trust
Dividend Stocks

TFSA Wealth: How to Earn $363 in Monthly Passive Income for Life

Canadian investors can harness the power of the TFSA to generate steady tax-free passive income for decades.

Read more »

Canadian Dollars
Dividend Stocks

TFSA Millionaire: How to Turn $40,000 Into $1.2 Million for Retirement

Here's how TFSA investors are using the power of compounding to buy top Canadian dividend stocks to build retirement wealth.

Read more »

edit Balloon shaped as a heart
Dividend Stocks

My 3 Favourite TSX Stocks Right Now

These three TSX stocks are my favourite performers. All have strong dividends, future growth, and historic performance behind them.

Read more »

Dividend Stocks

Passive Income Generator: 1 Dividend Stock Yielding 6.16%

A high-yield energy stock that pays monthly dividends is a reliable passive income generator for investors.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

3 Cheap Canadian Dividend Stocks to Buy Now for Passive Income

Investors seeking quality passive income can now buy top TSX dividend stocks at cheap prices.

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy for Passive Income

While these high-quality dividend stocks are oversold, they are some of the best stocks to buy for passive-income seekers.

Read more »