3 Renewable Energy Stocks That Are Too Cheap to Ignore

Here are three undervalued renewable energy stocks investors can buy and hold for outsized gains in the next 10 years.

| More on:
Utility, wind power

Image source: Getty Images

The ongoing pullback in equities has driven share prices toward multi-year lows. But it also allows you to buy undervalued stocks that have the potential to derive outsized gains over time. Investors can now aim to buy shares of companies that are part of rapidly expanding addressable markets, such as those operating in the clean energy space.

Here, we’ll look at three such renewable energy stocks that are too cheap to ignore right now.

Brookfield Renewable Partners

A clean energy giant, Brookfield Renewable Partners (TSX:BEP.UN), has already generated market-thumping gains for investors. In the last 10 years, BEP stock has returned close to 350% to shareholders after accounting for dividends. Down 37% from all-time highs, BEP also offers investors a dividend yield of 4.5%.

Brookfield Renewable has a wide portfolio of clean energy assets, including wind, solar, and hydro in addition to energy storage facilities. These assets generate steady cash flows that are also backed by long-term PPAs, or power-purchase agreements.

Brookfield Renewable aims to increase dividends between 5% and 9% annually in the long term, on the back of robust organic growth as well as highly accretive acquisitions and development projects.

BEP currently has a combined capacity of 24 gigawatts and is on track to almost triple this capacity in the upcoming decade. Currently, BEP stock is priced at a discount of 25% compared to average price target estimates.

TransAlta Renewables

A TSX stock that pays investors a monthly dividend, TransAlta Renewables (TSX:RNW) offers a dividend yield of 7.6%. TransAlta is focused on providing stable, consistent returns to investors by investing in highly contracted renewable and natural gas power-generation facilities.

These investments provide TransAlta with predictable cash flows on the back of long-term contracts with investment-grade counterparties.

TransAlta Renewables is among the largest generators of wind energy in the country. It has a diversified asset base with a presence in the Americas and Australia.

Priced at 16.6 times forward earnings, TransAlta Renewables is quite cheap, given it is well poised to benefit from multiple secular tailwinds in 2023 and beyond.

RNW stock is trading at a discount of 15% to consensus price target estimates. After accounting for dividends, total returns will be closer to 22%.

Northland Power

Another pure-play renewable energy company, Northland Power (TSX:NPI) develops, builds, and operates green power projects in the Americas, Europe, and Asia. Its portfolio includes wind, solar, hydro, biomass, and natural gas, which are backed by power purchase and revenue agreements. It already has controlling or minority interest in 27 facilities, allowing it to increase its capacity to 3.2 gigawatts.

Northland Power has expanded its presence in the Americas as it entered an agreement with EBSA in 2019. EBSA is a Columbia-based utilities company with more than 500,000 customers.

Since 2015, Northland Power has doubled its revenue, and in the last nine months, its top line has surged by 29.9% year over year. With operating margins at the top percentile compared to other utility peers, NPI is on track to improve earnings by 215% year over year in 2022.

Priced at less than 17 times forward earnings, NPI stock is also cheap and currently offers shareholders a dividend yield of 3.2%.

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 Aditya Raghunath has positions in Brookfield Renewable Partners and TransAlta Renewables. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

More on Energy Stocks

HIGH VOLTAGE ELECRICITY TOWERS
Energy Stocks

Algonquin Power & Utilities Stock Just Hit 52-Week Lows: Is it a Good Stock to Buy? 

Algonquin Power & Utilities (TSX:AQN) is trading near its seven-year low after dividend and outlook cuts. Is it a buy…

Read more »

tsx today
Energy Stocks

TSX Today: Why Canadian Stocks Could Fall on Tuesday, January 31

Despite the expected weakness in stocks today, the TSX index is on track to end the first month of 2023…

Read more »

Oil pumps against sunset
Energy Stocks

5 Things to Know About ARC Resources Stock in January 2023

Should you buy ARX stock?

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

2 Energy Stocks That Could Hold Up if Oil Prices Turn

Suncor Energy (TSX:SU) and Cenovus Energy (TSX:CVE) are great energy stocks that could continue higher through 2023.

Read more »

oil tank at night
Energy Stocks

2 Sub-$3 TSX Energy Stocks I’d Buy in 2023

Here are two under-$3 TSX energy stocks you can buy in 2023 and hold for the long term.

Read more »

A bull and bear face off.
Energy Stocks

2 Top TSX Energy Stocks to Buy as Crude Oil Is Set to Soar Higher

TSX energy stocks might keep topping charts in 2023 as well.

Read more »

Oil pumps against sunset
Energy Stocks

Is the Oil Boom Over?

The energy boom is over but dividend stocks like ARC Resources (TSX:ARX) are still attractive.

Read more »

Road signs rerouting traffic
Energy Stocks

2 High-Yield Energy Stocks I’d Buy and 1 I’d Avoid

I would buy energy stocks like Enbridge Inc (TSX:ENB) this year.

Read more »