The global transition from fossil-based energy production systems to renewable energy sources is underway, as most countries, including Canada, fight climate change. This rapid acceleration to cleaner and green energy favours renewable energy stocks.
Long-term investors can take early positions in two large-cap TSX stocks and one promising Canadian growth stock. Their current prices are too cheap to ignore vis-à-vis their potential total returns over the long run. Furthermore, the dividend payments should be rock steady.
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Predictable cash flows
Northland Power (TSX: NPI), one of Canada’s first independent power producers, develops, builds, and owns green global power infrastructure assets. Apart from clean-burning natural gas, this $8.21 billion company produce electricity from renewable resources such as wind and solar. It operates in North America, Latin America, Asia, and Europe.
The total operating generating capacity of the assets is three gigawatts (GW), although the potential capacity could reach four to five GW, given Northland’s early to mid-stage development opportunities. Management focuses on high-quality projects, and the predictable cash flows from revenue contracts increase shareholder value.
NPI underperforms year to date at $33.47 per share (-9.61%). Nevertheless, the decent 3.59% dividend should compensate for the temporary price pullback. NPI could return to its 52-week high of $47.13.
Dividend Aristocrat
Capital Power (TSX: CPX) also trades at a discount (-6.48% year to date), and the share price of $43.33 is a good entry point. Moreover, you’re investing in a Dividend Aristocrat that pays a hefty 5.35% dividend. The $5.06 billion owner and operator of renewable and thermal power-generation facilities in Canada and the U.S. has raised dividends for eight consecutive years.
The growth-oriented power producer has 29 facilities with a combined power-generation capacity of approximately 7,500 megawatts (MW). at 29 facilities. Management recently entered a 23-year clean electricity supply agreement with Public Services and Procurement Canada (PSPC).
Capital Power will support the Canadian government and commits to powering all federal buildings with 100% clean electricity by 2025. Other growth catalysts include projects in advanced development with a potential include renewable generation capacity of 310 MW and 512 MW of incremental natural gas combined cycle capacity.
Latin America’s renewable power leader
Polaris Renewable Energy (TSX: PIF) is up 3.91% year to date, yet the share price is still relatively low at $14.42. Its 52-week high is $23.05. If you invest in the small-cap stock today, you can partake of the 5.56% dividend yield. Management aims to become a high-performing renewable energy company and the renewable power leader in Latin America.
The $303.2 million firm operates in five countries and has one geothermal plant, four run-of-the-river hydroelectric power plants, and one photovoltaic solar farm. Two solar projects are coming soon. Polaris wants to meet the growing energy needs in Dominican Republic, Ecuador, Nicaragua, Panama, and Peru.
The mandates and economic policies of the governments support the growth of domestic renewable energy sources. Polaris intends to keep growing organically and through acquisitions and diversify its renewable energy portfolio.
Low-volatility stocks
Utility stocks generally have low volatility because of regulated assets and long-term contracts. However, Northland Power, Capital Power, and Polaris Renewable should attract more investors, as the world jumpstarts the renewable energy transition.
