The energy transition from fossil fuels to renewable energies is one of the biggest investment megatrends of our life. It will require an estimated investment of more than $ 100 trillion over the next 30 years to decarbonize the global economy.
Given the tremendous opportunities, we asked some of our energy donors about their best renewable energy investment options. she chose Renewable Brookfield (NYSE: BEP)(NYSE: BEPC), Total energies (NYSE: TTE), Royal Dutch Shell (NYSE: RDS.A)(NYSE: RDS.B), BP (NYSE: BP), and ReNew Energy Global (NASDAQ: RNW). Because of this, these companies are currently the top picks to invest in renewable energy.
A first class value creator
Matt DiLallo (Brookfield Renewable): I own shares in several companies in the renewable energy sector. My top holding company is Brookfield Renewable. That’s because it has done a phenomenal job over the years at creating shareholder value. Since its inception, Brookfield has generated an annualized total return of 20%.
As good as Brookfield has been in the past, I think it could add even more value to investors in the future. That’s because the global economy is working flat out to convert to renewable energy, which puts Brookfield in an ideal position to capitalize on this megatrend.
Brookfield has a leading global portfolio of renewable energy assets that should see higher electricity tariffs and lower costs in the years ahead as it grows in scale in the years to come. In addition, Brookfield has an even larger pipeline of high-yield renewable energy development projects that can be completed in the future. Adding the upward trend in anticipated acquisitions, Brookfield plans to grow its cash flow per share by up to 20% per year. That is almost twice as much as in the past ten years. Plus, it easily supports Brookfield’s plan to increase its dividend – what results 2.7% – at an annual rate of 5 to 9%.
This combination of Dividend income and above-average earnings growth enables Brookfield Renewable to generate high total returns for years to come. That’s why it is my favorite energy stock these days.
Three for one
Reuben Gregg Brewer (TotalEnergies, Royal Dutch Shell, BP): I find that I’m no longer a fan of all-out bets and prefer incremental rather than radical changes. Renewable pure plays are outside of my comfort zone … and I think they’re too popular. Brookfield Renewable Partners, as noted above, is well managed but is recognized for this achievement as the 3% return is close to its lowest ever. I’m not saying it’s a bad choice, it’s just not for me.
That’s why I own the disgraced integrated energy giant TotalEnergies. And it’s building a renewable energy business right now, using its old oil and natural gas operations to transition into the future. This is a process that will take time, but it is clear that TotalEnergies aims to become a big player in clean energy. And on the side I collect a fat dividend yield of 7.1%. The key here is that even in the most optimistic clean energy outlook, oil and gas will remain important for decades to come. TotalEnergies’ cash cow energy business is a foundation that helps me sleep well at night.
The European competitors Royal Dutch Shell and BP are following a similar path. TotalEnergies is exactly what I prefer mostly because it continues to openly support its dividend at the current levels. Shell and BP both cut their payouts to fund their clean energy plans. Shell has already returned to dividend growth, however, which in my opinion has made its appeal. Heavily leveraged BP is riskier, but probably has the greatest turnaround appeal. If you’re looking to hedge your clean energy bets, all three of these diversified energy giants are worth a closer look.
A newly listed share with great growth potential
Neha Chamaria (ReNew Energy Global): There’s a new kid in the renewable energy block and my eyes are glued to it. ReNew Energy Global will be listed on the Nasdaq on August 24th following its merger with the special purpose vehicle RMG Acquisition Corp II (NASDAQ: RMGB).
What attracted me to ReNew Energy is its leadership position in an industry with high potential in the second most populous country in the world, India. Put simply, ReNew Energy is India’s largest independent renewable energy producer, specializing in solar and wind power, with an operating capacity of 5.6 gigawatts (GW) and a promised capacity of 4.3 GW (as of last count).
Those numbers may pale in comparison to the capacity of its US counterparts, but keep in mind that India is still only taking small steps towards clean energy. And ReNew Energy still only owns about 6% of the country’s total installed renewable generation capacity, despite being the industry leader. In short, there is exponential growth potential for a company like ReNew Energy. In fact, it started 2012 with a capacity of just 0.03 GW, so its capacity growth was already exponential. Since 2017 alone, ReNew Energy’s operating capacity has grown at an average annual rate of 29.1%.
India has an ambitious target of installing 450 GW of renewable energy capacity by 2030, more than four times its existing capacity. With proper planning, ReNew Energy could make a significant contribution to this growth. I also like that ReNew Energy’s founder and CEO Sumant Sinha was previously associated with Suzlon Energy, one of the largest renewable energy companies in India, before starting his own business. His industry expertise combined with India’s clean energy goals could mean a lot to ReNew Energy stock in the years to come.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.