Interest in renewable energy continues to grow, and demand for investments in this sector is also on the rise. That is contributing to the upside growth potential for stocks in this category.
The strategy provides a bit of diversification over just buying individual stocks, but be aware that any kind of single-sector fund has more risk than broader focused funds.
Alternative Energy ETFs
With that in mind, here are two ETFs focused on renewable energy companies that have stronger upside potential.
Guggenheim Solar (TAN) is one of the largest ETFs focused on renewable energy, with over $369 million in total capitalization. It has risen 27% since the beginning of the year and has a dividend yield of 3.81%. The strong performance might reflect the fact that the fund is concentrated into only one subsector within renewable energy.
Another large ETF in the category is the iShares Global Clean Energy (ICLN). This fund has more diversification than Guggenheim, both in terms of the constitutent companies’ geography and number of subsectors. However, the fund has only risen 10% since the beginning of the year and has a 3.16% dividend yield.
Alternative Energy Stocks
A lot of energy-related holding companies are highly leveraged and fund acquisitions primarily by issuing more debt. That strategy isn’t sustainable long term, so if you’re going to buy individual stocks in the alternative energy sector, look for ones that don’t have a lot of debt on the books.
Atlantica Yield (ABY) has a diversified portfolio of renewable energy facilities and has a market cap of $2 billion. The dividend yield is an impressive 5.09%, but so far the stock itself hasn’t performed much since January.
Brookfield Energy Partners (BEP) uses wind and water to create energy. The company is based in Bermuda, but operates in the United States, Canada, and Brazil. BEP has a market cap of $5.6 billion and a sizeable dividend yield, of 5.58%. The stock price has risen 15% from the beginning of the year until now.
Covanta Holding Corp. (CVA) focuses on recycling waste into energy, and has a market cap of $1.9 billion. The dividend yield is high, at 6.64%, but the stock price has been flat since January.
Vestas Wind (VWDRY) sells equipment for wind energy and also services the equipment and the facilities that are its customers. The company is based in Denmark and have a market cap of $19 billion. The yield is small compared to other renewable energy companies at .96%, but the performance from the start of the year more than makes up for it at a whopping 50% gain.
Pattern Energy Group (PEGI) constructs, owns, and operates facilities used for wind energy. Pattern Energy has a market cap of 2.1 billion and yields an astounding 6.97%. In addition to the high yield, Pattern’s performance so rar in 2019 is 28%.
Incidentially, if you’re north of the US border, consider checking out stocktrades.ca, they have an excellent series on stocks. Their Questrade Review, in particular, is quite good.
Readers, have you thought about investing in alternative energy stocks or ETFs?