Green energy has quickly become one of the hottest topics for investors in recent years. After all, millennials increasingly want to buy products that are eco-friendly. This has granted companies like Tesla (NASDAQ:TSLA) an extra “cool factor” that has helped power its stock higher. Likewise, in an effort to combat the growing carbon footprint, many investors are now putting their money behind solar stocks. It’s not quite the same as the electric vehicle (EV) movement that has primarily propelled TSLA stock, but it’s still a movement worth paying attention to.
Solar power is a renewable energy source that uses sunlight to convert its rays into electric power. The electricity is then used to power homes, businesses and factories, thus eliminating the need for traditional fossil fuels.
The solar energy sector is still in its nascent phase and only accounts for 3.4% of the energy produced in the U.S today. However, the industry is valued at $52.5 billion and experts believe that this number could increase to $223.33 billion by 2026. Thanks to greater awareness on the effects of climate change, the need for clean energy is greater than ever.
The transition to a solar-powered world is years away, but the industry shows strong growth potential. This makes solar stocks a worthy investment for long-term investors. Here are our top picks in this sector:
- First Solar (NASDAQ:FSLR)
- Dominion Resources (NYSE:D)
- NextEra Energy (NYSE:NEE)
- Duke Energy (NYSE:DUK)
- Brookfield Renewable (NYSE:BEP)
Solar Stocks to Buy: First Solar (FSLR)
First Solar is a renewable energy company that designs and develops solar power modules and provides related operational services. While there are numerous solar energy companies that do this, First Solar stands out from the crowd for its proprietary technology.
The company created a thin-film solar module that can operate in less than ideal weather conditions at a lower cost per watt. This makes the technology a viable option for large scale businesses or factories. The novel technology is a major profit generator for the company resulting in billions of dollars in revenue.
First Solar’s baseline fundamentals are also very strong. The company recorded sales of $642.4 million this past quarter. This was up from the $585 million last year due to an increase in projected sales. The company also reported a net income of $36.9 million and earnings per share (EPS) of 35 cents per share. Moreover, the renewable energy giant is also sitting on a mountain of cash worth $1.64 billion in marketable securities.
This solar stock is a strong buy for any investor looking to make some long-term gains in renewable energy.
Dominion Energy (D)
Utility giant Dominion Energy is one of the top companies in the U.S with a market capitalization of $68.24 billion. The company currently serves nearly 7 million customers spread across the east coast. Dominion is a key player in the energy transmission business but hopes to generate its future revenue from renewable energy production.
In an effort to reach this goal, the company plans to invest $55 million over 15 years in technologies that decrease emissions. Dominion also estimates that it will have 16.1 GW generated by solar and wind energy by 2036. Although an investment in renewable energy will affect the short-term earnings, its efforts are expected to pay off in the next 15 years.
Long-term investors will find D stock to be a great investment. The company’s stock is up 4% this year and has also managed to sustain a dividend yield of 4.7%.
NextEra Energy (NEE)
NextEra Energy is the star of the energy sector this year with its stock up by almost 30% to date. Despite the novel coronavirus pandemic, the company claims that its long-term growth prospects are seeming unaffected by the crisis. The energy giant also operates one of the largest utility plants in Florida and has benefitted from the state’s growing population. This segment could be a huge cash cow for the company in the next few years.
In addition to its thriving utility business, NextEra is the largest wind and solar energy provider in the world. This segment has also seen increased demand in recent years as more businesses make the shift to green energy. NextEra Energy has 14 gigawatts of renewable energy projects, which will help boost its bottom line.
If investors needed any more reason to see NEE stock as one of the stronger solar stocks out there, it also boats a steady dividend yield of 1.99%.
Duke Energy (DUK)
Another solar stock that is on investors’ radar is Duke Energy. The company serves nearly 7.8 million customers across the U.S and has three lines of business. The first two are its utilities and natural gas segments, which operate in four U.S. states. The third segment is the production of wind and solar energy, which is distributed under long-term contracts.
The company made the transition to renewable energy when it realized that coal was a resource that was no longer in demand. The renewable business is still smaller than the natural gas and electricity segments but shows a lot of upside potential.
DUK stock is down 8% this year, but a dividend yield of 4.7% makes it an attractive investment. Investors who are in it for the long-haul should place their bets on this solar stock.
Brookfield Renewable (BEP)
The shift to green energy is great news for Brookfield Renewable that made some big gains on the production of hydropower. With the company’s gradual shift towards solar energy, this growth is expected to continue.
In its five-year plan, Brookfield outlined an optimistic increase in earnings and a consistent dividend growth through 2025. This confidence stems from the growth potential of the renewable energy market over the next 10 years. As reported by The Motley Fool the industry will grow at a rate of 15% each year with over $5-10 trillion in investments over the next decade.
Keeping in line with this outlook, Brookfield plans to spend between $800 million to $1 billion on renewable energy production each year. This is expected to improve its bottom line by 3-5% as well and increase profit per share by 10-16%. The company’s current dividend yield of 4% isn’t too shabby either.
All of that means BEP stock is one of the best solar stocks to invest in if you believe in the future of renewable energy.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.