7 Best Renewable Energy Stocks to Buy | Investing

Here’s some stock market advice: Buy low, sell high.

This oft-repeated adage is sometimes fodder for jokes and memes, but it’s great advice if you can pull it off.

One area of the stock market where you may be able to buy low is the renewable energy space, but you’ll probably have to wait a while before you can sell high.

Two prominent renewable exchange-traded funds – the iShares Global Clean Energy ETF (ticker: ICLN) and the First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN) – are down 27% and 34% over the past year, respectively, as interest rates and inflation pressure the sector. That’s in sharp contrast to the S&P 500’s 31% gain.

The Federal Reserve’s key interest rate is at its highest level in more than two decades, making green-energy infrastructure projects more expensive to finance. Meanwhile, inflation has made the raw materials and the components used for these projects more expensive.

Still, the long-term outlook is bright as governments around the world push to decarbonize their economies in the face of climate change and the desire to reduce reliance on unfriendly states for energy. One of the most prominent drivers is the Inflation Reduction Act in the U.S.

“We see significant long-term momentum in the renewable energy sector, bolstered by the global movement toward electrification and the critical role of backbone technologies to support the transition,” says Clay Bruning, an equity research analyst at Reynders, McVeigh Capital Management. “Innovations in infrastructure and battery technology are key to meeting the growing electricity demands of sectors, including the substantial and complex power needs of AI solutions.”

Here’s a look at some of the best renewable energy stocks to consider this year:

This stock is down 27% over the past year, in line with the wider industry, and down 11.4% so far in 2024. But over the past five years, the company’s shares have risen nearly 190% as solar installations in the U.S. have become more popular.

“Even though their stock might seem expensive, they could still be a good investment because they have a bright future,” says Shawn Carpenter, CEO at investment tracking service Stock Alarm. “They’ve been doing well financially, and they have a lot of projects lined up for the future.”

First Solar uses cadmium telluride technology for its solar cells in a process that has a smaller carbon footprint than other manufacturers that use polysilicon. Additionally, First Solar isn’t reliant on Xinjiang, a polysilicon-producing region in China where the U.S. says Muslim minorities are forced to work against their will.

“First Solar is a good company because they make innovative solar panels and focus on big projects for utilities,” Carpenter says. “Their unique technology gives them an advantage over other companies, and their focus on large projects means they have a stable business with room to grow.”

NextEra Energy Inc. (NEE)

This stock often makes lists of top renewable energy companies. Its regulated utility segment engages in the generation, transmission, distribution and sale of electric energy in Florida. Another segment produces electricity from renewable sources, including wind and solar. The company is also involved with green hydrogen, battery storage and nuclear plants.

“NextEra is the U.S. leader in renewables development and operations and a direct beneficiary of electricity and clean electricity demand growth in the coming years,” says Michel Sznajer, portfolio manager at Ecofin. “NextEra is in an ideal position to meet rising electricity demand from AI and take advantage of more intermittent sources of electricity in the supply mix.”

Sznajer says the company trades at a substantial price-to-earnings discount to the market even though it has similar earnings growth, a higher dividend yield and lower volatility. The stock has a forward yield of 3.4%, while the S&P 500 is yielding about 1.4%.

As a utility, NextEra can fit into portfolios in a defensive capacity. While it won’t outperform growth stocks in the tech sector, for example, it also may not decline as much when the market turns sour because people need electricity no matter what the economy is doing.

The stock is down 16% over the past year, but it’s added about 2% so far in 2024.

Brookfield Renewable Corp. (BEPC)

Speaking of decent dividends, this renewable energy developer recently raised its payout and has a forward dividend yield of 5.9%. Its shares are down about 15% this year.

Given the decline, “this is a good opportunity for investors looking to invest in the next economy to own a pure-play clean energy developer,” says Peter Krull, director of sustainable investing at Earth Equity Advisors. “The majority of the company’s pipeline is in the U.S. and should benefit from clean energy provisions in the Inflation Reduction Act.”

Brookfield is involved in a wide variety of renewable energy projects, including hydro, wind and solar. That diversity can prove useful as a hedge when one part of the renewable energy market is doing better than the other.

For example, utility-scale solar additions in the U.S. between January and August of last year grew by 36% over the same period in 2022, while small-scale solar grew by 20%, according to a Deloitte review of federal data. But over the same period, new wind capacity dropped by nearly 60%.

Fluence Energy Inc. (FLNC)

Battery storage is a key part of the decarbonized economy. Because solar and wind generation are intermittent based on when the sun is shining and wind is blowing, energy storage systems offer a way to help stabilize electric grids.

Fluence, an energy storage products and services company, has a presence in 47 markets globally. It has five battery suppliers in China, South Korea, Sweden and the U.S. The company expects to begin battery module production at facility in Utah this summer to take advantage of Inflation Reduction Act incentives.

The company also has the backing of German multinational technology conglomerate Siemens AG (OTC: SIEGY) and American utility AES Corp. (AES).

Fluence stock is down some 33% year to date in 2024.

“While it likely will remain a volatile play, it may be worth considering for long-term investors,” Krull says.

Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI)

HASI is another renewable energy company that stands to benefit from the Inflation Reduction Act as green investments ramp up.

The real estate investment trust, or REIT, says it is the first U.S. public company solely focused on climate solution investments. It provides capital to companies involved in energy efficiency, renewable energy and other sustainable infrastructure markets.

Its portfolio includes behind-the-meter energy efficiency; distributed solar and storage investments; grid-connected wind, solar and storage projects; fleet decarbonization; and ecological restoration.

“HASI has a strong pipeline of investment assets across a plethora of renewable energy projects,” says Bruce Kahn, portfolio manager at Shelton Capital Management. “Portfolio yield should continue to outpace their cost of capital, resulting in margin expansion.”

Although the U.S. offshore wind industry has struggled recently, over the long term it is expected to form a chunk of energy generation for major coastal metropolitan areas. The U.S. is playing catch-up to Europe and Asia, which have been offshore wind leaders for some time.

As a cable products company, Nexans provides infrastructure to connect offshore wind farms with the grids that transfer the electricity to homes and businesses on land. It also develops cabling solutions for electric vehicle charging stations, which will be in increased demand as more people adopt electric transportation.

“We also see Nexans as being a key player in renewing aging grids, such as in Europe and North America, as well as being on the forefront of expanding capacity in emerging markets’ grids, like in Africa and the Middle East,” says Bruning.

Bucking the trend in this list, Nexans’ American depositary receipts are up about 18% over the past year, while its shares on the Paris Stock Exchange are up about 13%.

Bruning also likes this Ireland-based company that provides software and power and data distribution technology to the automotive industry.

“We believe Aptiv is well positioned to reap the benefits of an international drive toward EV adoption, especially since its product implementation footprint within an EV is much larger than an internal combustion engine vehicle,” Bruning says.

The analyst says the company has 20% to 30% of the auto wiring and connector markets.

Short-term expectations for electric vehicle sales growth have been tempered, contributing to Aptiv’s shares falling about 27% over the past year and about 10% so far this year.

But over the long term, experts expect EV growth to be robust. Meanwhile, Aptiv has a solid foothold in the traditional vehicle market and a promising position to take advantage of future growth in electric vehicle sales.