Because of climate change, many of the world’s largest economies invest billions of dollars each year into alternative energy sources. In 2023, the United States spent more than $92 billion alone. The goal is to reduce the dependency on fossil fuels and alter the trajectory of climate change.
Renewable energy is one of the leading sources of alternative energy. In this article, we will explore why people invest in renewable energy companies and some of the best renewable energy stocks to consider this year.
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Why Invest in Renewable Energy Stocks?
The renewable energy sector has grown significantly over the past decade. Solar, wind, and hydroelectric power provide more than 20% of the electricity in the United States. As we look to reverse climate change, the need for renewable energy will only increase.
New renewable energy technology has begun to positively impact consumer prices. As products become more affordable, they become more attractive to buyers. This has a trickle-down effect, which is also good for investors.
Oil and gas stocks have dealt with many price fluctuations over the years. However, with all this money pouring into the research and development of clean energy companies, now is a great time to further diversify your portfolio with some of the top renewable energy stocks.
Pro tip: As you add new stock positions, using a portfolio tracker will give you a 360 degree view of your entire portfolio. This helps you understand how diversified you are and the overall returns.
Best Renewable Energy Stocks in 2024
Here are our favorite renewable energy stocks as we wrap up 2024.
NextEra Energy (NEE)
NextEra Energy is one of the leading producers of wind and solar energy in the United States. It also has several nuclear power plants in its portfolio. In 2022, the company announced its plans to be carbon neutral by 2045, which means they have a major stake in seeing alternative green energy work.
Over the past 10 years, the company has generated more than a 240% return for investors. Plus, NextEra is a great dividend stock to own. Not only does it have a dividend yield of 2.48%, but it has raised its dividend each year since 1995, making it a dividend aristocrat.
From a fundamentals standpoint, there’s a lot to like about NextEra Energy. It has an extremely healthy balance sheet compared to most utility companies. While its earnings per share (EPS) are expected to drop 5.56% next year, its PEG ratio is below one, meaning its stock price is inexpensive compared to its earnings growth.
Clearway Energy Inc. (CWEN)
Clearway Energy has a strong presence in wind and solar and powers its locations with natural gas. To raise cash, it sold its thermal business in 2022 for $1.35 billion. This extra cash on its books is helping it invest more heavily in alternative energies. It’s also expected that the extra cash will allow it to raise its dividend by roughly 8% annually over the next several years.
Clearway Energy is scheduled to report its next earnings in November for the period ending in September. Analysts predict the company to report $0.50 per share, which would be a significant increase over the year prior when they reported a $0.03 EPS.
One thing to be cautious about is their higher forward P/E ratio of 32.5, which is higher in comparison to the industry average of 18.45. Their PEG ratio is 2.32, further proving that they’re trading at a premium valuation.
Enphase Energy (ENPH)
Enphase Energy develops and manufactures micro-inverters for solar and battery systems. Their product converts direct current power delivered by solar panels into usable energy for residential homes.
The company recently released its latest and most powerful home battery, the IQ Battery 5P. It starts at 5 kWh but can scale up to 40 kWh. This is ideal for homes that suffer from power outages. These batteries will allow homeowners to still run appliances that require significant power to operate.
Even though Enphase Energy has had a choppy year of trading, we love its profitability moving forward into 2025. It’s also worth mentioning that average analyst price targets have them at $128.22, an 11% gain from where they’re trading today.
First Solar (FSLR)
As the demand for solar energy continues to spike, First Solar, the leader in solar panel production, is in a great position to benefit. They’re making significant investments to scale production so they can match the increased demand.
Investors should be confident about future revenue because, in 2023, they announced they have the contracts in place to generate production into the next decade. Plus, their balance sheet is in a great spot. They expect to end 2024 with between $900 million and $1.2 billion in cash. This should give them the means to effectively scale into the future.
If that all isn’t enough, First Solar is a revenue machine. They’re estimating next year’s revenue growth to be 35%, with an EPS increase of 75%. Average analyst price targets have the stock price going up to $290.31, a 14% increase from current levels.
Brookfield Renewable Corp (BEPC)
Investors looking for attractive dividend stocks will love Brookfield Renewables Corp. As one of the largest producers of hydroelectric energy, this renewable energy company offers a 4.26% dividend yield.
In addition to its huge stake in hydroelectric energy, Brookfield Renewable Corp also has a hand in solar, wind, and energy storage. Due to smart acquisitions and development projects underway, the company is expected to see revenue growth of around 52% next year.
Plus, with so much free cash flow, analysts expect them to continue raising their dividends like they’ve done each year since 2001.
The Bottom Line
With such a focus on climate change, renewable energy stocks are a smart play if you’re looking for ways to diversify your portfolio. Plus, multiple companies in our list offer extremely attractive dividends.
Frequently Asked Questions
Does Warren Buffet Invest in renewable energy?
Warren Buffet is currently investing more than $30 billion in renewable energy, most of which is in solar and wind.
Should you invest in renewable energy stocks?
It’s not a big secret that renewable energy has a lot of potential, and billions of dollars are being spent each year. If you’re looking for high dividend companies that can help further diversify your overall portfolio, then renewable energy is a great place to look.
Are there any renewable energy ETFs?
There are currently 18 renewable energy ETFs trading in the U.S. The three biggest are:
- iShares Global Clean Energy ETF ($2.15 billion assets under management)
- Invesco Solar ETF ($1.07 billion assets under management)
- First Trust NASDAQ Clean Edge Green Energy Index Fund ($657.81 million assets under management)