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

sale discount best price
Energy Stocks

Time to Pounce: 1 Phenomenal TSX Stock That Hasn’t Been This Cheap in a While

Now could be the time to get into Cameco (TSX:CCO) stock, which is up 81% in the last year but…

Read more »

Oil industry worker works in oilfield
Energy Stocks

Want Decades of Passive Income? 2 Energy Stocks to Buy Now and Hold Forever

These energy stocks offer attractive passive income and plenty of long-term growth potential, making them two of the best to…

Read more »

pipe metal texture inside
Energy Stocks

Should You Load Up on Enbridge Stock?

Enbridge stock remains undervalued despite its predictable, low-risk cash flows and strong dividend growth.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Brookfield Renewable vs. NextEra Energy: Which Clean Energy Stock Is a Better Buy?

Clean energy giants such as NextEra Energy and Brookfield Renewable are top long-term investment options in 2024.

Read more »

Gas pipelines
Energy Stocks

Buy, Sell, or Hold Enbridge Stock

Are you considering Enbridge (TSX:ENB)? Enbridge stock is a popular holding, but not all investors agree on whether you should…

Read more »

Burning gas and electric cooker rings
Energy Stocks

With Natural Gas in Demand, 2 TSX Stocks Are Set to Heat Up

Natural gas stocks such as Tourmaline will see their fortunes rise as natural gas demand and prices rise.

Read more »

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

potted green plant grows up in arrow shape
Energy Stocks

1 Ridiculously Undervalued Growth Stock Down 40% to Buy Hand Over Fist

Don’t miss your chance to load up on this high-yielding, renewable energy growth stock.

Read more »