A Green Energy Trio Poised to Dominate the Canadian Market

Invest in the future of energy with this green energy trio. These stocks could become your passive income companion in retirement.


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The Canadian market’s speciality is the energy and bank stocks that have been paying out dividends for years. Many Canadians are living off energy stock dividends through their retirement years. But the energy sector is undergoing a paradigm shift to green energy. The climate change warnings are real. And with every passing year, they pose a greater risk to the traditional energy sector.

Why invest in green energy stocks now? 

The 2030 carbon emission goals are the need of the hour. Today, green energy is just an option, and that is why pure-play green energy companies are slow to pick up. Green energy will become mandatory in the future and that could be the tipping point for these green stocks.

So far, we have learned to harness solar, wind, hydrogen, biomass, and nuclear and convert them into electricity or fuel. But the pure-play green energy companies are still small as these technologies are relatively expensive, and some of their output depends on the climate. With oil and gas, it is convenient as the infrastructure is already in place. So you can increase the supply anytime. That kind of flexibility is not yet available in renewable yet. But renewable has earned a place in crypto mining and electric vehicles. These revolutions could lead the way for other industries to go green.

Canada’s green energy trio 

The below three stocks are ready to ride the green energy wave.  

Utility stock 

Algonquin Power & Utilities (TSX:AQN) is a mid-cap power and utility company. Its power division generates green energy through hydroelectric, wind, solar, and renewable natural gas sources. The utilities division supplies electricity, water, and gas to residential and commercial settlements and earns money from utility bills. Algonquin increases its cash flows by acquiring new projects and building more projects. 

Algonquin’s stock nosedived in November as high-interest rates reduced profits. It has $7.9 billion in principal debt, with high exposure to variable interest rates. Thus, its first quarter interest expense surged 41% to $81.9 million. The higher interest expense stressed the utility’s profit margins to a level where it slashed dividends by 40% to keep cash for its expenses. The company is restructuring and making its operations efficient. It has stalled its capital investments and cancelled its Kentucky Power acquisition as it focuses on repaying debt. 

Now is a good time to buy the stock and lock in a 5.1% dividend yield. A utility stock will never be out of demand, and it can pay you dividends from its utility bill money even in a recession. Once interest rates ease, the company could scout for new projects and return to the normal course of business. So, buy while it trades at a 38%+ discount from its 52-week high of $18.8. 

Wind energy stock 

Besides a utility stock, you can invest in a pure-play wind energy company Northland Power (TSX:NPI). The company installs wind turbines and sells the power output to governments through power purchase agreements. 

It has 3.2 gigawatts of operating generating capacity and another 20 GW in the pipeline. These projects add to Northland Power’s cash flows as they come online. Its cash flows might fluctuate as it gets paid depending on the electricity units produced. The power output depends on the climate conditions. Northland’s recent first-quarter earnings were weak as it reported a sudden spike in energy prices that boosted profits in its base period (first quarter of 2022). 

Northland Power’s stock price corrected 34% from its August peak as earnings stabilized. Now is a good time to buy the stock and lock in a 4% dividend yield. 

Hydrogen fuel cell stock

Ballard Power Systems (TSX:BLDP) has been developing hydrogen fuel cells to power heavy vehicles like buses, trucks, rail and marine, and stationary power applications. While the technology is a success, it is still at an early stage of commercialization. Making hydrogen fuel cells is expensive. 

Ballard Power has started taking orders but is still years away from profits and dividends. Unlike other energy stocks, this stock can give you capital appreciation in the long term. 

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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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