The world is expected to reach net zero by 2050 — i.e., the amount of greenhouse gasses going into the atmosphere will be balanced by the amount of gasses extracted from it. The steps leading up to it are expected to slow global warming, and shifting to renewable energy is a big part.
However, owing to many practical limitations, renewable energy is growing at a different pace than most people predicted a few years ago. This also means that the sentiment initially propelled renewable stocks upward is less strong. Still, many Canadian renewable energy stocks are good ESG (environmental, social, and governance) investing and return picks.
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A Quebec-based company
Innergex Renewable Energy (TSX:INE) is a Quebec-based renewable energy company. Its current production portfolio still heavily leans towards hydro. However, the company is shifting gears, and the bulk of the power generation assets under development are wind-related. The current production capacity is about 2.6 gigawatts (GW), and about 10 GW is under development.
Innergex stock was a consistent grower that peaked in the early post-pandemic market. However, since hitting that peak in 2021, the stock has rapidly slipped and is already down 72%. The company also cut its dividends in half and currently offers a 4.1% yield.
The financials are stabilizing, and the company has adequate cash flow to fund its projects. The most significant negative catalyst is debt, and if the company can manage that effectively, Innergex stock might change course.
An Ontario-based company
Northland Power (TSX:NPI) is headquartered in Ontario. It’s less of a renewable energy company compared to Innergex, as a significant segment of its current production portfolio is natural gas-dependent.
However, the company is rapidly weaning off that energy class. Once the currently under-construction assets are completed, natural gas-based power generation will be a relatively insignificant part of the overall mix.
Since it’s also suffering from the bear market phase that has gripped most of the renewable market, the stock is heavily discounted (over 60% from its five-year peak) and quite overvalued. But it’s one of the few that didn’t buckle down and slash its payouts and is currently offering dividends at a 5.9% yield. Its debt is also modest compared to its market value.
A Bermuda-based company
Brookfield Renewable Partners (TSX:BEP.UN) is headquartered in Bermuda but has assets worldwide. It has a massive portfolio and an operating capacity of around 37 GW, and another 200 GW is under production. These power generation assets are spread out geographically, allowing the company to tap into different markets and economies.
The stock is also trading at a discount, but it’s one of the three that is moderately bullish right now. It has a massive amount of debt on its books and a significant amount of cash and investments to fund its projects. The company is raising its payouts but has yet to return to its 2019 level when it cut its dividends. However, the yield is decent enough at 5.2%.
Foolish takeaway
The three renewable energy companies are worth considering right now, albeit for different reasons. Innergex may offer solid recovery-fueled growth under the right circumstances, Northland’s dividends are reliable, and Brookfield offers a healthy combination of dividends and growth potential.
