The green recovery! I’d buy these renewable energy stocks to profit

I’m currently looking for renewable energy stocks that may be able to profit from the world’s shift to green energy. 

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Windmills for electric power production.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Boris Johnson is planning a green recovery for the UK economy. To this end, the government is planning to invest £12bn in renewable energy initiatives over the next few years. 

The prime minister also wants to turn the country into the Saudi Arabia of wind by 2030. Estimates suggest this could cost as much as £50bn. That might appear to be an extraordinary sum, but a significant auction of wind energy rights next year could attract up to £20bn of investment from the private sector alone. 

And it’s not just the UK that is investing heavily in renewable energy. Other countries are spending tens of billions on new green energy projects too. 

With that being the case, I’m currently looking for renewable energy stocks that may be able to profit from this theme. 

Renewable energy investments

One organisation leading the charge is energy group SSE (LSE: SSE). Last week, the company set out plans to triple its renewable energy generation by 2030.

It is already planning the world’s largest offshore wind farm. The 3.2GW Dogger Bank offshore wind farm could be operational by 2026. 

In total, the group is planning to invest £7.5bn in renewable energy projects in the near term. A chunk of this funding will come from asset sales.

Management is planning to flog approximately £3bn of assets over the next few years. This will help reposition the business away from its traditional footprints and towards renewable energy. 

Based on the shift, I’m optimistic about the company’s outlook. Green energy is a booming business, and costs are significantly lower. This should help the enterprise’s profit margins and growth potential. 

And as the business perseveres with its growth objectives, investors will be paid to wait. The stock currently supports a dividend yield of 6%.

Wind income

Another renewable energy income play I’ve been taking a closer look at recently is Greencoat UK Wind (LSE: UKW). 

This company owns and operates a selection of wind farms throughout the UK. These farms provide a steady stream of income for the business. Management reinvests a portion of the income. The group also returns a large chunk of cash to investors every year. 

It recently declared a 1.8p per share dividend for the quarter to the end of September. That suggests an annualised dividend of 7.2p per share, or a dividend yield of 5.5% on the current stock price. 

When it comes to growth, the firm has lots of options. Over the past few years, the company has built a £2.2bn portfolio of wind farms around the UK. It’s used capital from existing assets, debt and cash from investors to build this renewable energy bank of assets. 

With a strong pipeline of new wind farms under construction around the country, Greencoat should have lots of options to buy new assets in future. As such, I think this stock has the potential to provide investors like me with steady dividend growth for years to come. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.

More on Investing Articles

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »