Investing in renewable energy stocks represents one of the most lucrative long-term opportunities on the market. Apart from the significant growth potential that they offer, renewable energy stocks offer a growing dividend, too.
That’s not all. Traditional fossil fuel utilities are now straddled with massive transitional costs to shift their portfolios to renewables. This only furthers the already intriguing opportunity in renewables.
Prospective investors thinking of investing in renewable energy stocks should consider one or more of these options today.
Earn a handsome monthly income while investing in renewable energy
TransAlta Renewables (TSX: RNW) is an option for those investing in renewable energy stocks. Calgary-based TransAlta is one of the largest renewable energy companies in Canada, with a growing portfolio of facilities in Australia, the U.S., and Canada.
Those facilities are diversified across several different renewable elements, including solar, wind, hydro, and gas. And like most utilities, TransAlta is bound by long-term regulated contracts that span for decades.
In fact, many of TransAlta’s facilities have PPAs (power-purchase agreements) that span into the 2030s or beyond. This means TransAlta will continue to generate a stable and recurring revenue stream.
That revenue stream allows the company to continue investing in growth and paying out a generous dividend.
As of the time of writing, that dividend works out to an insane 8.47% that is paid out on a monthly cadence. This means that prospective investors that drop $25,000 into TransAlta (always as part of a larger, well-diversified portfolio) will generate over $170 each month.
Part of the reason for that crazy yield is because the stock (like many of its peers) has dropped in 2023. In fact, over the trailing 12-month period, the stock dipped 30%. Part of the reason for that is surging interest rates, which have slowed (investment-reliant) growth.
So then, how does this help prospective investors investing in renewable energy stocks? There are two critical points in mind.
First, the pullback impacted nearly every stock on the market. The fact that TransAlta pulled back more than others should represent an opportunity to buy a great stock at an even greater discount.
Finally, TransAlta is a long-term investment. The stock may be down today, but over a longer timeline, it will, like the market, recover. And while you wait for that recovery, your portfolio will benefit from that juicy monthly yield.
Patience is needed, but income is coming
Algonquin Power & Utilities (TSX: AQN) is an intriguing option for investors thinking about investing in renewable energy stocks. For those that are unaware, Algonquin is an Oakville-based utility company with two key segments.
Algonquin’s regulated services group serves over one million customers across North America. The segment provides water, electric, and gas utility services.
The renewable energy arm is responsible for both generating and selling the electrical energy produced from the company’s growing portfolio of renewable energy facilities. This includes hydro, wind, solar, geothermal, and natural gas elements. Those facilities are located both across North America and internationally.
Algonquin’s facilities boast a generating capacity of approximately 2.3 gigawatts, and like TransAlta, those facilities are bound by long-term contracts. In the case of Algonquin, those contracts have an average 12-year remaining contract life.
Turing to dividends, Algonquin offers investors a quarterly dividend. As of the time of writing, that yield works out to a yield of 5.32%. And like TransAlta, Algonquin has dipped over the past year. In fact, over the trailing 12 months, Algonquin’s stock price has dropped over 35%.
That dip can be largely attributed to Algonquin’s decision to slash its dividend. That was then compounded by the company terminating its decision to acquire Kentucky Power Company earlier this year.
And like TransAlta, investors should see Algonquin as a long-term gem that currently trades at a discount.
Investing in renewable energy can boost your retirement income
No investment is without risk. And while the market has been volatile in 2023, both TransAlta and Algonquin offer some long-term, defensive appeal for nearly any portfolio.
In my opinion, either of these stocks would do well as part of a larger, well-diversified portfolio.
