As the global push for sustainability gains momentum, investors are eyeing renewable energy stocks to buy. Currently, an increasing number of nations are committing to tripling installed renewable energy generation capacity by 2030 in pursuit of the 1.5°C climate goal. In addition, consumer demand for eco-friendly products is putting clean energy stocks on Wall Street in the limelight. As a result, at the end of 2023, there were around 1,500 funds focusing on the climate, up from about 200 in 2018.
Yet, it isn’t a straight line growth trajectory for renewable energy shares as numerous challenges persist. Industry watchers highlight that clean energy adoption faces short-term setbacks due to high costs and demand fluctuations. In fact, over the past year, the S&P Global Clean Energy Index fell 25%, underperforming the benchmark S&P 500 Index, which returned close to 25%. Nevertheless, many investors recognize the long-term promise of sustainable practices and technologies.
Therefore, let’s explore three top renewable energy stocks to buy amid the global green shift.
Brookfield Renewable Partners (BEP)
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Among renewable energy stocks to buy, Brookfield Renewable Partners (NYSE:BEP) can be a compelling long-term investment option. BEP owns and operates a diversified portfolio of clean energy assets, including hydroelectric, wind, solar and battery storage facilities. This spread helps mitigate risk by not relying on a single technology. Also, it positions BEP on a strong foothold to capitalize on the overall growth across the renewable energy landscape.
While the broader market for renewable energy stocks has experienced some turbulence especially in the past year, BEP has shown resilience as the recent first quarter results highlighted. Revenues came in at $1.49 billion compared to $1.33 billion for the year-ago quarter. Basic and diluted loss per unit was 23 cents. But, these results were below Wall Street’s estimates.
Meanwhile, in early May, Brookfield and Microsoft (NASDAQ:MSFT) announced their collaboration to deliver over 10.5 GW of new renewable power capacity globally. Wall Street noted the large size and global scope of this deal with approval.
Since January, BEP stock is down almost 2%, while the dividend yield is a generous 5.5%. Wall Street remains bullish on BEP shares with a 12-month price forecast of $30.50, suggesting an upside potential of 18% from current levels.
ReNew Energy Global (RNW)
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Investors may also consider ReNew Energy Global (NASDAQ:RNW). With headquarters both in India and the U.K., RNW mainly provides utility-scale renewable energy solutions in India. With wind, solar and hydro energy projects across India, the company offers a slice of the rapidly growing renewable energy sector in a major developing economy.
The green energy group released the fourth quarter of fiscal year 2024 results in late February. Total revenue for the quarter was $232 million, compared with $193 million for the same period 12 months ago. Management increased the bottom line guidance for fiscal year 2024 by 2%.
In addition, management recently announced that RNW has completed constructing 1.94 GW of renewable energy assets. This takes the cumulative capacity set up by the company to over 10 GW. Currently, the company provides 10% of the total renewable energy capacity of India.
Despite the growth story, the stock declined almost 17% year-to-date (YTD). Yet, the 12-month median price forecast is at $8.59 suggesting an upside potential of 35% based on current prices.
Global Energy iShares ETF (ICLN)
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We conclude today’s discussion with a renewable energy sector ETF, namely the Global Energy iShares ETF (NASDAQ:ICLN). Established in June 2008, the fund offers broad exposure with a basket of around 100 companies across the clean energy spectrum. Those include solar, wind and other renewable sources.
Geographically, ICLN boasts a diversified allocation, with the U.S. leading at 35%, followed by Denmark (11%), China (9%), Brazil (8.5%) and Spain (7%). The fund’s sectoral breakdown highlights its comprehensive approach, encompassing electric utilities (29%) and renewable electricity (23%). There are also stocks from ancillary industries supporting the clean energy transition such as heavy electrical equipment (10%), semiconductor equipment (10%) and semiconductors (10%).
Potential investors should note that ICLN offers concentrated exposure, with the top 10 holdings comprising over 50% of the fund’s net assets exceeding $2 billion. Among them are established players like First Solar (NASDAQ:FSLR) and Enphase Energy (NASDAQ:ENPH). Additionally, the ETF has utility giants like Consolidated Edison (NYSE:ED), and international market leaders such as Spanish renewable energy leader Iberdrola (OTCMKTS:IBDRY) and Danish wind turbine manufacturer Vestas Wind Systems (OTCMKTS:VWSYF).
Since January, ICLN has declined around 10%. Currently, it is changing hands at 14.5 times trailing earnings and 1.6 times book value. Finally, the dividend yield is 1.8% and expense ratio is 0.41%.
On the date of publication, Tezcan Gecgil 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.
