The renewable energy industry looks set for strong growth in the years ahead. Here in the UK, the market is projected to grow by around 9% per year between now and 2030.
Recently, I’ve been scanning the UK stock market for attractive renewable energy stocks. Here’s a look at two I’d be happy to buy for my portfolio today.
Top UK renewable energy stocks
One clean energy stock I really like the look of is Renewables Infrastructure Group (LSE: TRIG). It’s a FTSE 250-listed investment company that owns a broad portfolio of wind and solar farms across the UK and Europe. Its goal is to provide steady, sustainable returns to investors through dividends while preserving the capital value of its investment portfolio.
What I like about TRIG is that it offers a lower-risk way of playing the renewable energy theme. Typically, clean energy shares tend to be highly volatile. One reason for this is that many companies that operate in this space are not making any money. TRIG is different because it owns a diversified portfolio of assets and is actually profitable. I think it could play a key role in my dividend portfolio and provide steady long-term returns.
Zooming in on the dividends, TRIG has a great track record. Over the last five years, it has paid out annual dividends of 6.73p, 6.61p, 6.45p, 6.35p, and 6.20p. This year, analysts expect a payout of 6.76p per share. At the current share price of 130p, that equates to a very attractive yield of 5.2%.
One risk to consider here is that the company is trading at a 14% premium to its net asset value. In other words, those investing now are paying a price that’s higher than the sum of the company’s assets.
I’m comfortable with this risk however. Given TRIG’s track record, I think the stock is worth a premium.
A FTSE 100 clean energy stock
Another clean energy company I like is Johnson Matthey (LSE: JMAT). This is a FTSE 100 stock with a market-cap of around £5bn.
JMAT is not a ‘pure play’ on the renewable energy theme. That’s because the company’s quite diversified, operating across a range of industries including chemicals, pharmaceuticals, and electric vehicles.
However, the company does have a strong focus on sustainability and, recently, it’s been moving into the green hydrogen space. For example, in July, it acquired the assets of Oxis Energy Limited, which it believes will “significantly accelerate” the scale-up of its green hydrogen business.
Like Renewables Infrastructure, I see JMAT as a lower-risk way to play the clean energy theme. This is a large, well-established company that’s profitable and pays regular dividends (the prospective yield is about 3%). I think it offers a better risk/reward proposition than some of the more popular UK clean energy stocks such as ITM Power.
Of course, it’s not risk-free. There’s no guarantee the company’s move into green hydrogen will pay off.
However, with the stock trading on a forward-looking P/E ratio of just 12, I’d be happy to take a small position here.
Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.