The fastest way to find a collection of renewable energy stocks to choose from is to use the holdings from one of the larger renewable energy-focused ETFs. I’ve chosen the First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN), which tracks the performance of the Nasdaq Clean Edge Green Energy Index.
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The fund is rebalanced four times a year and reconstituted twice in March and September. It recently had 65 holdings, varying from 9.34% for the top holding to 0.03% for the last holding. The fund invests in four sub-sectors: Advanced Materials, Energy Intelligence, Energy Storage & Conversion, and Renewable Electricity & Renewable Fuels.
I selected one of my three renewable energy stocks from QCLN’s top 10 holdings. The other two have weights under 1%, but I like them just the same.
Brookfield Renewable Corporation (BEPC)
The actual holding held by QCLN is Brookfield Renewable Partners LP (NYSE:BEP).
However, Brookfield Renewable Corporation (NYSE:BEPC) was created so that investors could invest in its renewable power assets through a corporation rather than a limited partnership, so there’s no K-1 tax form to worry about each year.
The company’s June 2022 annual shareholder’s meeting highlighted that BEPC generated $934 million in funds from operations (FFO) in 2021, 10% higher than a year earlier. In the past fiscal year, it brought approximately 1,000 megawatts (MW) of power online in 2021, with 15,000 MW in some stage of development.
In the five years between 2021 and 2026, it expects to grow FFO by 10% or more annually. It finished 2021 with more than $68 billion in power assets, 81% percent of which are in North and South America.
BEPC currently trades at 1.78x sales, its lowest valuation since Brookfield Renewable Partners LP shareholders received a special distribution in July 2020 of one BEPC share for four units held in the LP.
For those who want a more diversified portfolio, you can own BEPC indirectly through Brookfield Asset Management (NYSE:BAM), which owns 26% of the company. BAM stock is down 25% year-to-date.
You won’t go wrong owning BAM over the long haul.
NextEra Energy Partners LP (NEP)
NextEra Energy Partners LP (NYSE:NEP) is a growth-oriented limited partnership created by its parent company, NextEra Energy (NYSE:NEE), in June 2014. It owns wind and solar projects, natural gas, and infrastructure assets in the U.S.
NEP went public in June 2014, selling 16.25 million units at $25. After the initial public offering, NEE owned 82.6% of the pure-play renewable energy company. Today, it controls approximately 55% of the voting power.
In mid-June, NEP held its 2022 Investor Conference. Its presentation highlighted that it had exceeded its goals set at its 2019 Investor Conference.
For example, it sought to grow LP distributions by 12% to 15% per year between 2019 and 2024. So far, it’s increased them by approximately 15% per year. In addition, over the past three years, it’s acquired 3 gigawatts (GW) of renewables and storage assets.
When it went public in 2014, NEP had approximately 1 GW of renewable energy. Today, it has 8.3 GW, with 4.3 billion cubic feet (Bcf) of natural gas. As a result, its annualized distributions since its IPO have increased by 290%, from 75 cents to $2.93 at the end of 2021.
Down 9.4% YTD, I wouldn’t say that NEP is a screaming buy, but it’s not overpriced either. Its current price-to-book ratio is 2.04.
Ameresco (AMRC)
Ameresco (NYSE:AMRC) is the business of owning renewable assets and helping others implement clean energy solutions for their businesses. Founded in 2000, it became a public company in 2010.
In 22 short years, Ameresco’s completed more than $11 billion in energy solution projects for more than 8,000 customers worldwide. In addition, it owns 353 million watts of energy (MWe) assets for solar, landfill gas, renewable natural gas (RNG), and battery storage.
Between Ameresco’s renewable assets and those of its customers, it’s helped to prevent the emission of 75 million metric tons of carbon dioxide into the atmosphere since 2010. That’s equivalent to 187 billion miles [75 million divided by 13.6 million multiplied by 34 billion] driven by an average passenger vehicle.
As a result, Ameresco has been able to increase its revenues since 2017 by more than 21% annually, from $717 million in 2017 to an estimated $1.87 billion in 2022. Over the same period, the company has grown its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by 27.1% annually.
With Ameresco stock down more than 46% YTD, it’s trading at the same levels it did in December 2020, 18 months ago. Under $40 would be a perfect entry point.
