Dividend shares provide me with a regular source of income, but it’s by no means guaranteed. This passive income is the holy grail for many investors, but picking the right stocks is often the hard part.
Today, I’m looking at two stocks that provide me with access to the green energy market. Given Europe’s apparent reliance on Russia for gas, energy independence and sustainability is becoming increasingly important in ways that we’re all experiencing.
I don’t own either of these stocks, but given the current challenges around energy security, I think it’s wise for me to look more closely.
BP
BP (LSE:BP) is an oil and gas giant, but it’s also at the forefront of the energy transition. By 2025, nearly half of the group’s $15bn capital expenditure budget will be channelled into greener energy sources. By 2030, this green arm of the business could generate as much as $9bn-$10bn in underlying cash profits.
The group is investing in low carbon energy to scale up in solar and offshore wind, and develop new opportunities in carbon capture and hydrogen. BP is also switching on 100,000 electric vehicle charging points and opening more than 1,000 new strategic convenience sites. And in the last three years, the company’s renewables pipelines has tripled.
However, oil and gas will remain a sizeable part of its portfolio. And it’s certainly be able to deliver to shareholders this year as energy prices skyrocketed. BP made $8.2bn (£7.1bn) between July and September, more than double its profit for the same period last year. Meanwhile, the dividend yield is currently sitting at 3.7% — which could be better.
Despite the profitability of the business, and the prospects in green energy, I’m not buying yet. I see better entry points in 2023, especially if a global recession reduces demand for hydrocarbons.
Greencoat UK Wind
Greencoat UK Wind (LSE:UKW) is a closed-ended investment company. It aims to provide investors with an annual dividend that increases in line with retail price index inflation while preserving the capital value of its investment portfolio. The dividend yield currently stands at an attractive 4.9%.
The firm has 44 wind farm investments across England, Scotland, Wales and Northern Ireland with an aggregate net capacity of 1,289.8 megawatt (MW).
The trust owns facilities that provide enough energy to power over 1.5 million homes. It’s not all mega-farms either. It’s recent investment in Windy Rig, Scotland, consists of 12 turbines and is 100% owned by the trust. Greencoat had approximately 5% market share of operating UK wind farms.
The company’s capacity to deliver for its shareholders is partially dependent on wind conditions — something it has no control over — and the general attractiveness of wind energy. However, trends suggest that UK wind is a profitable investment.
The share price has been pretty volatile since late summer — when Liz Truss became Prime Minister. I’m going to buy this stock very soon with the price at sub-150p and a discount of 4.57% over its net asset value.
