Renewable energy stocks find themselves on the right side of a long-term secular trend. Though they got a bit ahead of themselves in 2020 and 2021, the tailwind is still very much in play! In fact, you could argue that the tailwind has been strengthened, even as their share prices have fallen over the past several quarters.
Indeed, Mr. Market doesn’t always have it right, especially when investors are running scared. With the war in Ukraine providing a massive surge in the price of oil, fossil fuels have really shined. As I predicted in early 2021, the tides have turned, and oil stocks are once again thriving over renewable energy and green plays.
Oil’s surge could power renewable energy stocks rebound
Now that oil has rocketed above US$100 per barrel (this would have been unheard of just two years ago) and renewable stocks have sold off viciously; I think it’s a good time to check the wreckage in the green energy space again. Though I’m not yet ready to throw in the towel on the fossil fuel trade (I think it still has room to run), I think that green energy stocks are more than worth a second look for investors who may have been watching the recent decline closely.
High energy prices could bolster demand for renewables. Indeed, many firms are taking a hit from the higher price of oil. While supply can’t keep up with demand over the medium term, I would look for the top renewable plays to gradually pick up traction over the next three or so years. The longer oil stays higher, the stronger the demand for green energy will be. It’s not just avoiding carbon emissions; it’s about avoiding incredibly high prices that eat away at profitability of individual firms.
So, without further ado, please consider the following two renewable energy stocks on the TSX. I think they’re magnificent buys, even as the market sinks lower over the numerous headwinds out there, ranging from the Ukraine war to the horrific COVID crisis, which is not quite over yet.
Northland Power
Northland Power (TSX: NPI) is one of the most underrated renewable firms out there. At $38 and change per share, though, I think the firm offers solid renewable exposure for a reasonable price and a nice 3.1% dividend yield. Shares are down 24% from their highs just north of the $50-per-share mark. Undoubtedly, the green energy trade has lost traction, and though there are more exciting plays in the space, I find NPI stock to be a perfect balance of passive income and growth. The $9 billion company has a lot to prove, and I’d argue it could have the most upside in a green energy tailwind.
Brookfield Renewable Partners
Brookfield Renewable Partners (TSX: BEP.UN)(NYSE: BEP) is the gold standard in alternative assets. The renewable partners shares are one of the most intriguing ways to play the renewable energy space today, especially after the latest decline. The huge 3.7% dividend yield is rich, and it’s subject to growth. Down around 30% from its high north of $60 per share, I find the well-run renewable powerhouse to be a bargain that’s hiding in plain sight. Though the $12.2 billion firm may be stuck in a rut, I think the payout is enough incentive for investors to stick around.
