June Heatwave: Canadian Solar Stocks With Massive Upside Potential

Solar stocks like TransAlta Renewables (TSX:RNW) should be on your radar, as green energy investments ramp up.

The ongoing heatwave and wildfire season is making it clear that we need climate action right away. Even if you’re not convinced about the impact of climate change, you can’t deny the fact the government has committed more investments to cleaner energy sources in recent years. That means there’s an opportunity to make money as an investor. 

Here are the top three Canadian solar stocks that should be on your radar if you’re looking to add a little green energy to your portfolio. 

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

Source: Getty Images

Canadian solar stock #1

TransAlta Renewables (TSX: RNW) is an ideal target for green energy investors, because of its humongous dividend. The stock offers an 8.2% dividend yield at current market price. 

The Calgary-based company operates an extensive network of renewable energy plants. The portfolio includes wind, hydro, and natural gas besides solar farms spread across North America. Altogether, the company has capacity to produce 1,995 megawatts (MW) of energy, much of which is derived from wind power. 

The stock is down 28.7% over the past year, which means the valuation is improving. Investors seeking a bargain in the renewable energy space should keep an eye on this undervalued stock. 

Canadian solar stock #2

Brookfield Renewable (TSX: BEP.UN) has assets worth a whopping $52 billion under management. The company’s portfolio stretches across several continents and has a combined production capacity of 25,700 megawatts every year. That makes Brookfield one of the largest clear energy firms in the world. 

Scale is everything in this game and the Brookfield management team is well aware of it. They plan to invest heavily over the next few years to add another 126,000 megawatts in production capacity. 

Meanwhile, the stock has performed better than other solar stocks. Brookfield stock is up 83.7% over the past five years, which implies a compound annual growth rate of 12.9%. That’s better than most TSX stocks. It’s even more impressive when you consider the dividend yield, which is around 4.2% right now. 

The total return of this stock could be double digits annually if its growth strategy plays out as expected. Keep an eye on it. 

Canadian solar stock #3

Oakville-based Algonquin Power & Utilities (TSX: AQN) is a prime target for solar stock investors. The company’s portfolio of solar, wind, hydro, and geothermal plants have the capacity to generate 2.3 gigawatts at the moment. By 2025, the company expects to deploy roughly $9.4 billion to expand capacity by another 1.6 gigawatts. 

That should make it one of the largest green energy providers in the country. 

Meanwhile, the stock is slipping lower. It’s currently trading 49.2% below its all-time high set in early 2020. That’s pushed the dividend yield up to 5.2%. This low valuation combined with a robust growth strategy and attractive dividend yield make the stock a top pick for patient investors. 

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

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