Top 7 Clean Energy Stocks for 2017

Clean Energy StocksInvesting in Clean Energy Stocks

Renewable energy stocks are a political football for Democrats and Republicans, but investors should ignore the partisan bickering. The fact is, you can make a lot of money off the top renewable energy companies. Why? Because fossil fuels are doomed in the long run, and alternative energy sources will become the dominant system sooner or later.

It’s easy to roll your eyes at alternative energy sources, I get it. It’s annoying when Leonardo DiCaprio struts off a private jet and lectures you about energy conservation. Nothing makes you want to invest in clean energy stocks less.

That being said, it’s silly to miss out on triple-digit gains because of Leonardo DiCaprio. Or Elon Musk. Or whoever else is getting under your skin.

They shouldn’t matter; making money is more important.

When you’re sitting on a beach in the Bahamas, you can start thinking about politics. Until then, keep your eye on top clean energy stocks.

In fact, here are a few facts to prove my point:

  • Solar prices dropped 62% since 2009;
  • Solar will likely be cheaper than coal by 2025;
  • Since 2009, the amount of solar power doubled more than seven times;
  • China is investing heavily in solar power; and
  • U.S. cities (i.e. Atlanta) want energy independence.

(Sources: “Solar Could Beat Coal to Become the Cheapest Power on Earth,” Bloomberg, January 2, 2017; “China’s solar power capacity more than doubles in 2016,” Reuters, February 4, 2017; “Atlanta commits to 100% renewable energy by 2035,” PV Tech, May 4, 2017.)

What you’re seeing is capitalism at work. Creative destruction. Companies are building solar panels and wind farms because the economics for it are better than fossil fuels—not because they want to save the environment (or at least that’s not the only reason).

Even the biggest energy conglomerates are adding renewable projects to their books. Why? Because they see the endgame as clearly as I do.

Whether they admit it, they know that fossil fuels are going to lose this battle over the long term. They know the top clean energy stocks are a threat.

How else could this story end? Fossil fuels are, by definition, limited, while renewable energy is infinite. This means that fossil fuels will get more expensive over time when, by comparison, renewables will continue to fall.

Top Renewable Energy Companies

Don’t imagine that these changes will happen overnight.

The oil industry is still powerful, which is why I’m leaning towards renewable companies with solid cash flows. Show me the money! Don’t ask me to rely on the goodwill of other investors.

It’s not like the fossil fuel industry is going to roll over and die. Between the Organization of the Petroleum Exporting Countries (OPEC) and Exxon Mobil Corporation (NYSE:XOM), they certainly don’t lack influence.

Heck, U.S. Secretary of State Rex Tillerson is from Exxon. He left the oil company to come work for the Trump administration, but not before taking a $180.0-million exit package. (Source: “Rex Tillerson Would Head to D.C. with $180 Million Retirement Package from Exxon,” Fortune, January 4, 2017.)

I wonder why they paid him so much…possibly to repay the favor once he’s in office?

My point is that fossil fuels are backed by powerful interests.

Oil companies might hedge their businesses with a few solar projects, or else sponsor a wind farm for PR purposes. But don’t mistake where their core business interests lie: fossil fuels.

Clean Energy Stocks List

So if we know that Exxon and its compadres will give renewables a rough time, where do we put our money? Here’s a clean energy stocks list for you to consider.

Ticker Company Price Yield
CAFD 8Point3 Energy Partners LP $13.19 7.78%
ABY Atlantica Yield PLC $19.63 5.09%
NEP Nextera Energy Partners LP $33.12 4.41%
CVA Covanta Holding Corp $14.10 7.09%
PEGI Pattern Energy Group Inc $29.43 5.62%
HASI Hannon Armstrong Sustnbl Infrstr Cap Inc $21.74 6.07%
CSIQ Canadian Solar Inc. $13.54

Here’s how it works: You’ll notice that a lot of these stocks are actually “yieldcos.” For those who aren’t familiar with the term, it describes an unusual corporate structure used to fund renewable energy stocks.

  1. A “sponsor” company creates a publicly-traded subsidiary—the yieldco.
  2. The sponsor then builds an alternative energy project.
  3. It puts that project up for sale, giving the yieldco the first option to buy.
  4. The yieldco buys and operates the project.
  5. The yieldco passes its profits through to shareholders.

Investors can rack up juicy returns on these kinds of stocks.

Yieldcos are the rarest of beasts, high-dividend growth stocks. It’s not often you can find assets that combine both characteristics, because they are so obviously in competition, but these are the exceptions.

More on the Top Renewable Energy Stocks 2017

Nonetheless, I don’t want you rushing headlong into the unknown. Besides using your own due diligence, you should read the brief summaries of each company below.

I’d suggest you take a look at each of the clean tech stocks before you sign away your pension. Some of them are better than others, and your ability to handle them is based on your risk tolerance.

1. 8Point3 Energy Partners LP

There’s a funny story about the ticker symbol for 8Point3 Energy Partners LP (NASDAQ:CAFD). The company didn’t pull “CAFD” out of a hat; it chose those letters to stand for “Cash Available For Distribution.”

What that means is 8Point3 is trying to return as much money as possible.

Okay, I’ll admit it’s not exactly a funny story, but it does give you a sense of what matters to management. They want to keep costs down while maximizing available cash.

Of all the reasons to pay a premium, that’s certainly not one I disagree with.

CAFD stock chart

Chart courtesy of StockCharts.com

2. Atlantica Yield PLC

In addition to its attractive yield, Atlantica Yield PLC (NASDAQ:ABY) has also provided investors with a fair amount of capital gains. This is in large part due to the “divorce” from Abengoa SA (BME:ABG), Atlantica’s original sponsor.

Abengoa SA went bankrupt last year, causing no end of problems for its subsidiaries. Several projects that were financed by debt (and earmarked for yieldcos) were left hanging. This was a dangerous time for PLC stock, but the company appears to have emerged relatively unscathed.

There’s still more cleanup required. However, I wouldn’t push the sins of the parent onto the yieldco, because there is a lot of money on the line.

PLC stock returned 18.59% over the last six months, not including the five percent dividend yield. There might be further gains in store if the Department of Energy grants a waiver to certain loan guarantees that it had given to Abengoa.

We could see the yieldco’s share price explode as a result. Keep an eye out for this one; it’s still got some gas in the tank.

ABY stock chart

Chart courtesy of StockCharts.com

3. Nextera Energy Partners LP

Unlike most other yieldcos, Nextera Energy Partners LP (NYSE:NEP) has a great relationship with its parent company. The elder Nextera has held up its end of the bargain really well, even during the worst days of the yieldco crash.

That said, NEP stock has fallen a long way. Some might view that as a warning to steer clear of renewable energy stocks. Others might see it as an opportunity to pick up clean energy stocks at bargain bin prices.

After all, there has been somewhat of a resurgence in the yieldco market. Disasters like the collapse of Sunedison Inc (OTCMKTS:SUNEQ) are slowly fading from memory, so perhaps hope can be rekindled.

NEP stock chart

Chart courtesy of StockCharts.com

4. Covanta Holding Corp

Covanta Holding Corp (NYSE:CVA) isn’t your ordinary renewable either. Does it operate solar energy farms? No. Does it have a few wind power projects? No.

Covanta turns waste into electricity—that’s its business.

Unless you live in a town with one of these factories, you probably won’t understand the fiery debate around municipal solid waste (MSW). The company essentially burns garbage and manifests energy from it.

There are a lot of people who find MSW damaging to the environment, but they are on the fringes of the environmental movements. Most people consider it a pretty useful way of preventing trash from reaching the landfills.

Personally, I don’t even think much about the debate. All I see is the 7.09% dividend yield. Not to mention that Covanta is at the nexus of two trends: the rise of alternative energy and the search for new forms of garbage disposal.

CVA stock chart

Chart courtesy of StockCharts.com

5. Pattern Energy Group Inc

Pattern Energy Group Inc (NASDAQ:PEGI) is somewhat unique among yieldcos. Rather than load up its portfolio with solar firms that would be in direct competition with all the rest, it focuses on the less-competitive wind farm business.

This ends up giving Pattern Energy a competitive edge.

There are 18 wind projects in the United States, Canada, and Chile, totaling 2,644 megawatts of energy. Each of these projects has contracted out its power under purchase power agreements, which should keep investors flush with cash for the foreseeable future.

PEGI stock chart

Chart courtesy of StockCharts.com

6. Hannon Armstrong Sustainable Infrastructure Capital Inc

Hannon Armstrong Sustainable Infrastructure Capital Inc (NYSE:HASI) is an outlier on the list because it doesn’t actually build or operate anything—it is a financial firm.

Hannon is basically an investment bank that doles out money for alternative energy projects. As such, it could provide another layer of insulation from potential downturns in renewable energy stocks.

There are other benefits as well. Hannon can invest in both the upstream and downstream side of the business without adding heavy upfront costs to its balance sheet. Owner-operators find that more difficult to do, in part because they require the technical expertise for that area of operation.

But Hannon is just investing. Its job is to pick winners; not to take on the arduous task of winning. Hence, it has an extra degree of flexibility.

HASI stock chart

Chart courtesy of StockCharts.com

7. Canadian Solar Inc.

Canadian Solar Inc. (NASDAQ:CSIQ) is on the leading edge of cost-cutting in the solar sector. For years now, the company has automated its manufacturing process in a bid to slash expenses. And you know what? It’s working.

Canadian Solar now produces some of the most affordable solar modules in the world, which is why it has relationships with so many different providers.

Even retail solar companies like SolarCity Corp (NASDAQ:SCTY), which is now a part of Tesla Inc (NASDAQ:TSLA), use modules from Canadian Solar. The company’s shares were obviously affected by the industry-wide slump, but we’re looking for a strong return as the company starts to sell off its completed projects.

CSIQ stock chart

Chart courtesy of StockCharts.com

Should You Invest in Clean Energy Stocks?

The bottom line is this: renewable energy stocks offer tremendous upside over the long term. Long-term trends are squarely in their corner, as is the momentum of energy politics. But pay heed to this word of caution.

Not every alternative energy stock will make it to the other side of five years. A handful will get eliminated because of mismanagement, while others will disappear during a period of consolidation.

But the solar farms won’t be going anywhere. Nor will the wind farms, or SWM facilities. They will continue to generate income regardless of whose name is on the building, and that means the push towards clean tech is unstoppable.

You get to decide whether you want to join the winning team. That is not the moral argument you hear from environmental activists, but I happen to think it’s more persuasive.