High-dividend stocks! A FTSE 100 renewable energy stock to buy

I’m searching for the best renewable energy stocks to buy as demand for clean energy soars. Here’s a top stock from the FTSE 100 I’m considering buying today.

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Green energy is on course to become a gigantic growth sector for the next couple of decades. As a share investor, I’m looking to capitalise on this by buying some top renewable energy stocks.

This is why I’m considering buying SSE (LSE: SSE) shares for my portfolio today. I used to own this share years ago before selling out as competitive pressures crushed its retail business. But having since sold off that division, I think the FTSE 100 business an attractive buy again.

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SSE now concentrates solely on electricity generation. And, more specifically, it focusses on creating power from wind turbines. I’m excited following its plans to speed up its decarbonisation efforts. By 2031, it aims to generate 50TWh of renewable power each year.

An expanding renewable energy stock

SSE was in the news last week too after announcing exciting expansion into Southern Europe. The business said it was acquiring a 3.9GW Siemens Gamesa Renewable Energy portfolio of onshore wind development projects covering Spain, France, Italy and Greece. The acquisition will cost a cool €580m.

I like this plan because it gives the business greater geographic spread. This is important for renewable energy stocks because it reduces their dependence on strong weather conditions in one or two places. Electricity generation (and thus company profits) can take a whack if the wind stops blowing in a particular place, as SSE saw to its displeasure last year.

Strength through diversification

Another pleasing part of Friday’s announcement is that SSE says the move provides a platform for the company to create “a balanced portfolio of assets across wind, solar, batteries and hydrogen technologies”.

Exposure to different renewable energy sources gives SSE further strength through diversification. SSE also said that the deal with Siemens Gamesa Renewable Energy provides an opportunity to build up to 1GW of additional co-located solar developments.

The dangers facing SSE

I do have concerns about buying SSE shares though. As I have mentioned, electricity generation from green sources can be extremely unpredictable. And if the wind fails to blow in the company’s core regions then profits can take a substantial whack.

I’m also worried because of the large amount of debt SSE has on its books. This reflects the eye-poppingly expensive nature of the electricity generator’s operations. High debt levels are a worry right now because the cost of servicing it is growing as interest rates rise.

A FTSE 100 bargain!

However, it’s my opinion that the possible benefits of owning SSE shares outweigh the risks. Besides, at current prices of £18.30 per share, I think the renewable energy stock’s low valuation more than reflects those dangers.

City analysts think SSE’s annual earnings will soar 23% in this fiscal year (to March 2023). This leaves it trading on an ultra-low forward price-to-earnings growth (PEG) ratio of 0.7.

Finally, I like SSE because of its excellent 4.8% forward dividend yield. This is a FTSE 100 share I’d happily buy today and look to hold for years.

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Royston Wild 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.

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