Believe it or not, the future of energy is renewable energy, and considering the current global climate situation, it is the right way to go forward. According to the International Energy Agency, the projected renewable capacity expansion by 2027 will be 85% faster than the past five years. It also expects renewables to become the world’s largest source of energy generation by the end of 2025. Countries are embracing clean energy and are investing heavily to fight climate change. This has led to the rise of the best energy stocks to buy.
These numbers throw light on the growing importance of renewables in our lives. It will also boost energy companies in the coming years and we will see them expanding their asset base and report strong revenue numbers. If you want to make the most of the renewable energy boom, here are top 3 energy stocks to add to your portfolio.
NextEra Energy (NEE)
Solar panels on rooftops in California, an increasingly common sight, solar stocks
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I love NextEra Energy (NYSE:NEE) for multiple reasons. The company is the world’s largest producer of electricity from solar and wind energy and it operates the largest electricity utility in the U.S. It is gradually moving towards renewable energy and has a solid pipeline. This will allow it to double its renewable energy generation capacity by 2026 and we will be able to see it reflect in the financials in the next few years. It is a key player in the industry and holds a dominant position in Florida where it has several wind and solar utilities. What makes the stock even more appealing is its attractive dividend. The company has a record of 27 years of dividend payout growth and enjoys a yield of 2.48%. This is one of the high potential energy stocks to own.
When it comes to energy stocks, one thing to remember is that people will use energy in an inflation or a recession. And with the rise in global warming, the electricity demand is only going to rise. This means NextEra Energy will not go out of business anytime soon. Another positive catalyst for the stock is the growing number of data centers that need a huge amount of electricity. This is where NextEra is set to benefit. NEE stock is exchanging hands at $75 today and is much lower than the 52-week high of $91.
NEE has a strong growth potential and the financials are solid too. It expects to grow its dividend by 10% annually at least through 2024 and has gone from reporting losses to making a net profit in the first quarter. With an expansion in the renewables capacity by 2026, the company will be able to see higher earnings and better dividend growth.
Brookfield Renewable (BEPC)
A shot of wind energy mills with green hills and the skyline in the background.
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A phenomenal wealth creator, Brookfield Renewable (NYSE:BEPC) is one of the top energy stocks to buy today. The company owns several renewable energy projects in different countries and will benefit from the transition to renewable energy in the coming years. One solid reason to invest in this stock is its diversified assets which include solar energy, hydroelectric power, wind energy, and energy transition assets. It also sells power to utilities and has fixed-term contracts that help generate steady revenue. This means you will be able to invest in multiple energy assets through this company.
BEPC stock is exchanging hands at $31 today and is up 12% year to date. There are risks associated with the business and we will only be able to see a significant upside when the company invests in other assets. In the recent quarter, it closed investment deals worth $8 billion and also managed to add 700 megawatts of capacity to the portfolio. It also has a pipeline of projects worth 110 gigawatts of power.
The company reported a revenue increase of 14% year over year. As with any other industry, you cannot expect the company to show returns immediately. If you hold on to this stock, it will move upwards.
With countries taking big steps towards renewable energy, there is high potential for the company to expand its market share. The company has a long history and solid track record of delivering impressive results and dividend investors will find its yield of 4.23% attractive.
First Solar (FSLR)
solar and wind power in coastal saline and alkaline land, develop shoals background representing solar stocks.
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Another energy stock worth considering is First Solar (NASDAQ:FSLR), a manufacturer of solar panels. The company makes cadmium telluride solar modules that help convert sunlight into electricity. This year has seen a significant rise in energy costs and this has led to a high demand for solar power. FSLR is one of the high potential energy stocks for multiple reasons.
It has been in the news recently for the order from Israel-based Energix. The company has placed an order of 5 gigawatts of its modules and it will deliver the products between 2026 and 2030. This means we will see strong sales in the coming years and it will reflect in the financials. FSLR stock is trading at $200 and is up 37% year to date. The stock is up 171% in the past year. However, there is a lot more to come for this stock. It has also reported strong financials in the recent quarter with sales of $548 million and a net income per share of $0.40. It expects net sales between $3.4 billion to $3.6 billion for the year and I believe it has the potential to make it happen.
Additionally, the company has also received $1 billion of revolving credit facility for five years from several banks. It shows that multiple investors believe in the future of First Solar. It has performed well even in a market downturn and this is proof of the company’s potential to grow in the coming years. FSLR stock is the one to own.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.
