Renewable energy stocks have long been slated to become the next big thing as the world transitions into a greener future for the energy industry. While the market has been abuzz with the much-anticipated transition, renewable energy stocks have yet to pick up how investors wanted them to. While the shift to clean energy is undoubtedly happening, the transition might be much slower than anticipated.
While many investors might have lost interest in investing in renewable energy stocks, I think now is the time to double down on them. If you want to leverage the growth of the renewable energy industry to capture significant capital gains for long-term wealth growth, investing in the best of the best while share prices are still low can be an excellent approach.
Today, I will discuss Northland Power (TSX:NPI), a $6.27 billion market cap renewable energy stock on the TSX that you should have on your investment radar for this purpose.
Northland Power stock
Northland Power is an independent power producer headquartered in Toronto that develops, builds, owns, and operates clean and green energy infrastructure worldwide.
Its operational areas include Canada, the rest of North America, Europe, Latin America, and Asia. Investing in its shares provides investors with exposure to renewable energy income streams diversified across several geographical locations.
Additionally, it offers exposure to clean energy income across wind, solar, hydro, and clean-burning natural gas. NPI stock also has several onshore and offshore wind energy products, where production is far more efficient and can remain the biggest earning segment for the company for decades.
Challenges for the industry and NPI stock
Despite all the positive factors going for it, the last few years have been difficult for NPI stock. The renewable energy sector has seen slower-than-anticipated growth. The series of aggressive interest rate hikes by central banks added the pressure of higher interest expenses. Despite these factors cutting into its earnings, Northland Power has faced challenges specific to the company itself.
A few of its wind farming facilities have undergone breakdowns, leading to costly replacements during a time of economic uncertainty.
While it beat its estimates during its latest quarter, the company hasn’t been enjoying the best results in terms of financial performance. In its third-quarter earnings, it saw sales decrease from $556 million in 2022 to $513 million in the same quarter in 2023. The company’s profits also slid by almost $30 million.
Foolish takeaway
The company has cited a sharp increase in market prices in Europe in 2022 for this problem. Despite these challenges, its management reported that NPI stock has achieved significant milestones for two offshore wind projects. While the challenges might persist for the company in the short term, the renewable energy industry undoubtedly has a bright future.
Being a major player in the global renewable energy industry, NPI stock is in pole position to deliver outsized returns when the sector starts running at full steam.
As of this writing, NPI stock trades for $24.59 per share, paying its investors their shareholder dividends at a juicy 4.88% dividend yield. It can be an excellent addition to your self-directed portfolio while its share price is down significantly from its all-time highs.
