2 renewable energy stocks to buy

This Fool picks out two shares to buy, one in the UK and one in the US, he believes could be among the best renewable energy stocks.

| 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.

Young lady working from home office during coronavirus pandemic.

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.

With the demand for green energy set to explode over the next few years, I’ve been looking for renewable energy stocks to buy for my portfolio to capitalise on this trend. Here are two companies I’d buy for my portfolio right now. 

Stocks to buy 

The number of renewable energy stocks in the UK is relatively limited. Therefore, I’ve been looking overseas for other options. One of the best companies I’ve found is NextEra Energy (NYSE: NEE).

As of May 2021, NextEra’s the world’s largest producer of wind and solar energy. It’s far bigger than anything we have here in the UK and has substantial economies of scale from its giant renewable energy projects across the United States in Canada. 

Given the company’s size, scale and reputation, it looks as if it’ll be a significant player in the renewable energy sector for the foreseeable future. That’s why I believe this is one of the best stocks to buy in the industry today. It could also benefit from Joe Biden’s $2.3trn infrastructure plan and the president’s commitment to halving US greenhouse gas emissions by 2030. 

As well as the group’s growth potential, the stock also offers a dividend yield of 2.1%. 

However, this company might not be suitable for all investors. Its North American focus means its success is highly dependent on what happens across the pond. Some investors might find it challenging to interpret the laws and developments that occur in the US, which could have a significant impact on NextEra’s business. 

Despite this risk, I’d buy the company for my portfolio of renewable energy stocks today. 

Renewable energy stocks 

Back in the UK, I’d also buy Greencoat UK Wind (LSE: UKW). Put simply, I think this is one of the best stocks to buy in the green energy space. This is due to its exposure to wind energy, extensive portfolio, experienced management team and dividend yield. Indeed, at the time of writing, the stock offers a dividend yield of 5.7%. 

This shareholder payout is funded by income from its portfolio of UK wind farm projects. The majority of the company’s revenue is generated through Power Purchase Agreements. These aren’t fixed pricing agreements, therefore the firm has some exposure to UK power prices.

The structure has its benefits and drawbacks. On the one hand, the company will earn higher profits if power prices jump. On the other, if prices slump, due to oversupply, profits will fall. This could be particularly troublesome for Greencoat, considering the corporation’s elevated level of debt. If profits fall substantially, the firm may have trouble meeting its debt obligations. 

Still, I believe this is one of the best renewable energy stocks to buy today for the reasons outlined above. That’s why I’d buy Greencoat right now. 

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

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

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

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »