These 3 Renewable Energy Stocks Are the Future

Renewable energy companies Brookfield Renewable Partners L.P. (TSX:BEP.UN)(NYSE:BEP), Innergex Renewable Energy Inc. (TSX:INE), and TransAlta Renewables Inc. (TSX:RNW) stand to benefit from a shift to socially responsible investing.

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the fastest-growing investing styles is socially responsible investing (SRI). It is estimated that socially responsible investments in the U.S. doubled between 2013 and 2016, reaching $121.6 billion dollars. What is SRI? It’s an investment style that considers environmental, social, and corporate governance impacts on society. Investors are increasingly looking to invest in companies that provide important societal or environmental benefits. How important is it? In Canada, there were approximately $1.5 trillion assets engaged in some sort of SRI strategy in 2016. This was a 49% increase over the prior year.

One sector that stands to benefits from the increased popularity of SRI is renewable energy. There are three main players on the TSX in the renewables space; Brookfield Renewable Partners L.P. (TSX:BEP.UN)(NYSE:BEP), Innergex Renewable Energy Inc. (TSX:INE) and TransAlta Renewables Inc. (TSX:RNW). When analyzing shareholder returns over the past year, the results have been decidedly mixed. Brookfield was the only one in the black, returning 2.89%, while Innergex lost approximately 7% of its value. TransAlta was the big loser, with its share price plunging 23.31% over the past year.

Brookfield is a household name and is considered by many to be best in class. Year to date, the company has lost approximately 7% of its share price, and its yield has jumped to an attractive 6.45%. The company is a Canadian dividend aristocrat and just extended its dividend-growth streak to nine years with its 5% raise in February. At the mid-point of guidance, the company expects growth of 13% and a dividend-growth rate of 7% over the long term.

Innergex is the smallest of the bunch in terms of market cap, and at current prices it’s the most expensive of the group. It is trading at a significant premium to Brookfield and TransAlta in terms of price to book (P/B), price to sales (P/S), forward price to earnings (P/E) and enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA). Innergex has a modest four-year dividend-growth streak and a current yield just above 5%. The company is awaiting regulatory approval for its $1.1 billion acquisition of Alterra Power. The acquisition is expected to be accretive to distributable cash flow and fuel its growth to achieve net installed capacity of over 2,000 MW by 2020.

TransAlta has been the worst performing of the three, and its slide has also made it the cheapest of the three. It is trading at a discount to P/B, forward P/E, EV/EBITDA, and it currently has the highest starting yield at 7.91%. It is also a Canadian dividend aristocrat with a five-year dividend-growth streak. TransAlta’s underperformance has been, in large part, a result of its dispute with Fortescue Metals Group, which was contracted to obtain power from TransAlta’s South Hedland Facility in Australia. The company has long-term contracts and very little debt.

Despite their recent underperformance, all three stand to benefit from the shift towards SRI. Income investors have been particularly attracted to these companies, and each of their respective dividends have cash coverage ratios above one. As a result, all are well positioned to continue paying and raising dividends. At today’s prices, Brookfield and TransAlta provide investors with the most attractive entry points.

Should you invest $1,000 in Alimentation Couche-Tard right now?

Before you buy stock in Alimentation Couche-Tard, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Alimentation Couche-Tard wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Mat Litalien is long TransAlta Renewables. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Here’s Exactly How a $20,000 TFSA Could Potentially Grow to $200,000

Index funds like the iShares S&P/TSX Capped Composite Index (TSX:XIC) are tax free in a TFSA.

Read more »

Dividend Stocks

How I’d Invest $6,000 in Canadian Real Estate Stocks to Build Lasting Wealth

Canadian REITs on sale! See how grocery-anchored retail properties offering 9% yields could turn $6,000 into lasting wealth despite US…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Economic Headwinds: Should You Still Consider Buying the Dip?

A market dip might seem like a bumpy road, but it can be far smoother in the future with the…

Read more »

e-commerce shopping getting a package
Dividend Stocks

Consumer Spending Plays Amidst the Current Market Dip

Consumption may go down in market dips, but certain consumer stocks are certainly better off than others.

Read more »

Asset Management
Dividend Stocks

12% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades

Stocks with high-dividend yields carry risks. But they could be a good long-term investment. Here is a 12% dividend stock…

Read more »

Canadian flag
Dividend Stocks

How I’d Build a Foundation of Canadian Value Stocks in My Investment Strategy

Canadian investors can explore iShares Canadian Value Index ETF for value stock ideas to build a foundation for their diversified…

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Transform a $30,000 TFSA Into a Cash-Flow Machine

Here's why TFSA investors should consider owning dividend stocks such as Mullen Group in 2025.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Dip Buyers Could Win Big in Today’s Market Dip

If you want to buy the dip, think long-term. Which is why this TSX stock is a top option.

Read more »