Best Canadian Renewable Energy Stocks – My top 5

Thanks to higher demands and supply shortages, oil prices and oil-related stocks have gone for a nice run over the last year and a half. Despite this run, I continue to believe that renewable energy is the future. Climate change is real and happening. Therefore, it is vital for us to put more emphasis on developing and using renewable energy and do some good for the planet.

While we are still in the early stage of green and renewable energy adoption, it makes a lot of sense to hold renewable energy stocks in your investment portfolio and take advantage of the continued innovations in this sector. 

Here are my top 5 picks for the best Canadian renewable energy stocks.

What is a renewable energy stock?  

By definition, renewable energy is energy that has been derived from natural processes that are not finite or exhaustible. Some people also define renewable energy as energy that can be produced at a rate that is equal to or faster than the rate at which they are consumed. 

Some examples of renewable energy include solar, wind, geothermal, hydropower, tidal, biomass, and liquid biofuels. Please note that biomass can only be considered renewable energy if its rate of consumption does not exceed the rate of regeneration. 

On the flip side, fossil fuels are not considered renewable energy because there’s a finite amount and they cannot be easily replenished.

So, renewable energy stocks are simply public traded companies that invest significantly in producing and distribution of renewable energy. Usually these companies are part of the utility sector. 

Why invest in renewable energy stocks

When I started doing some research on renewable energy, I was surprised to learn that Canada is the 6th overall in green energy production. I think we can do better than that though. Ideally, I’d like to see Canada increase its capacity in the years to come. Who knows, maybe Canada can be one of the leaders in green energy production.  

So why invest in renewable energy stocks? 

Well, per the supply and demand of microeconomics, by investing in renewable energy stocks, you are creating demands and encouraging companies to invest and expand their renewable energy capacity. The more people that invest in renewable energy stocks, the more demand there is. This should, in theory, help to increase global green energy production, as well as that of Canada. 

Best Canadian Renewable Energy Stocks – My top 5

In the past number of years, many utility companies are shifting more and more focus to renewable energy. If you look at traditional utility companies like Fortis and Hydro One, they are investing in infrastructures to produce energy from clean and renewable sources. However, it doesn’t necessarily mean these companies would automatically be considered as renewable energy stocks. 

To be considered as one of the best Canadian renewable energy stocks, my selection criteria is that the company must produce most of its energy via clean and renewable sources. 

Here are my picks for the best Canadian renewable energy stocks. 

1. Algonquin Power & Utilities Corp (AQN.TO)

Algonquin Power & Utilities Corp. is a diversified Canadian renewable energy and regulated utility conglomerate with assets across North America. Algonquin actively invests in hydroelectric, wind and solar power facilities, and utility businesses (water, natural gas, electricity), through its two operating subsidiaries: Liberty Power and Liberty Utilities.

  • Dividend Yield: 5.07% 
  • 5 Year Dividend Growth Rate: 10%
  • Dividend Increase Streak: 11 years

If you look at the Canadian renewable energy sector, Algonquin is one of the leading companies in this sector. The company operates and owns ~4.1 GW of renewable assets with ~3.8 GW of prospective greenfield development in its pipeline. The nice thing with Algonquin is that it is not just generating renewable energy, it is distributing energy as well. 

Best Canadian Dividend Stocks - AQN.TO

At above 4%, the dividend yield is quite solid. AQN has also managed to increase its dividends for 11 years with a 5 year dividend growth rate of 10%. From this perspective, I think AQN is quite dependable.  

2. Brookfield Renewable Partners (BEP.UN / BEPC.TO)

Brookfield Renewable Partners operates one of the world’s largest publicly traded renewable power platforms. Its portfolio consists of approximately 21,000 MW of capacity and nearly 6,000 generating facilities in North America, South America, Europe and Asia. 

best Canadian dividend stocks - BEP

BEP is an experienced global owner and operator of wind, solar, distributed generation, and storage facilities. The company’s investment objective is to deliver long-term annualized total returns of 12%–15%, including annual distribution increases of 5–9% from organic cash flow growth and project development. 

It has an established track record of creating value by prudently acquiring, building and financing assets, and actively managing its operations.

  • Dividend Yield: 3.46% 
  • 5 Year Dividend Growth Rate: 5.1%
  • Dividend Increase Streak: 12 years

I like Brookfield Renewable Partners because I think there is a lot of future growth in the renewable space. The share price has dropped quite a bit in the last few years so this may provide long term investors with a good opportunity to purchase shares at a discount. 

Some people might not be convinced about Brookfield Renewable because of the level of debt. Can the management keep their debt level under control, especially given the current environment of rising interest rates? 

Well, since Brookfield Renewable is a subset of the Brookfield Asset Management empire, I am convinced that BAM will always take care of BEP and its investors. 

3. Northland Power (NPI.TO)

Northland Power is a power producer dedicated to developing, building, owning, and operating clean and green global power infrastructure assets in Asia, Europe, Latin America, North America, and other selected global jurisdictions. 

The company’s facilities procure electricity from clean-burning natural gas and renewable resources such as wind, solar, and efficient natural gas. Unlike many renewable companies, Northland Power is one of the few Canadian utility companies that pay a monthly dividend.

  • Dividend Yield: 3.08%
  • 5 Year Dividend Growth Rate: 2.2%
  • Dividend Increase Streak: 0 years
Best Canadian monthly dividend stocks - Northland Power

The company currently has a well-diversified portfolio with over 3 GW of operating capacity. The company has a target of reaching 4–5 GW of renewable energy capacity by 2030. Although the dividend payout increase has not been great, the stock price has been on an impressive run over the past number of years. 

4. TransAlta Renewables Inc (RNW.TO)

TransAlta Renewables has over 100 years of experience in developing, owning, and operating renewable power generation facilities. The company currently owns 23 wind farms, 7 natural gas plants, 13 hydroelectric facilities, 1 solar farm, and 1 battery storage, providing the company with a total of 2,537 MW of power. The majority of TransAlta’s cash flow comes from its wind farms and natural gas plants. 

  • Dividend Yield: 5.34%
  • 5 Year Dividend Growth Rate: 1.4%
  • Dividend Increase Streak: 0 years

One thing TransAlta is different from Algonquin is that TransAlta does not sell electricity to consumers. It utilizes regional partners for selling electricity to end consumers. 

For those dividend investors that want to get paid every month, TransAlta pays monthly dividends and the yield is very attractive. One key thing to keep in mind is that RNW hasn’t had a solid track record when it comes to growing its dividends consistently. 

In fact, the last time RNW raised dividends was back in early 2016. Therefore, I’d consider RNW as one of the high dividend yield, low dividend growth stocks

5. Boralex Inc. (BLX.TO)

Boralex is pretty small compared to the likes of AQN and BEP. Based in Quebec, Boralex has been providing affordable renewable energy for over 30 years. It is one of the leaders in the Canadian market and France’s largest independent producer of onshore wind power. Boralex also has facilities in the US and development projects in the UK.

In recent years, Boralex has more than doubled its capacity to over 2,492 MW in renewable capacity with a 2025 target of 4,400 mW. Of the 2,492 MW total installed capacity, 2,032 MW was in wind energy and 244 MW in solar energy. 

  • Dividend Yield: 1.69%
  • 5 Year Dividend Growth Rate: 3.7%
  • Dividend Increase Streak: 0 years
Best Canadian renewable energy stocks - Boralex

Boralex is known for developing small and mid-sized projects and has major cash flows from long-term contracts. Furthermore, the company has limited exposure to the rising interest rates because Boralex has secured fixed long-term rates times to contract maturity.

Best Canadian Renewable Energy Stocks – Final Thoughts 

The Canadian renewable energy space is still relatively small and we should see further future growth. I’m convinced the renewable energy sector has a promising future. This is why over the last few years, we have been busy buying more shares of Algonquin and Brookfield Renewable.

I think both of these companies have a very bright future ahead of them. The renewable energy sector has faced a bit of headwind throughout 2021 and part of 2022, which has provided some great entry points for dividend investors.

Dear readers, do you own any renewable energy stocks in your portfolio? 

Here are some articles you might want to check out:

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10 thoughts on “Best Canadian Renewable Energy Stocks – My top 5”

  1. Thank you for the article Bob! I bought AQN more than a year ago after reading one of your posts. I have been happy with the dividend!

    I’m not happy about the BC government’s push to go electric. We prefer the warmth and reliability of our natural gas equipment, including two natural gas fireplace that provide warmth and wonderful ambience.

    I’m pleased to hear that Fortis and Enbridge are investing in renewable natural gas (RNG), and hope that it becomes more widely used as part of the natural gas fuel mix. RNG is apparently carbon neutral, so is not subject to carbon tax

    Reply
      • Fortis and many other big utilities have used used GRN.to go after RNG – Excellent Canadian technology out of Vancouver. They are getting noticed now …. I own them in my speculative portion of my portfolio (5%) . Good risk- reward ratio for a small company as I see it . Zero debt too. 31 M cash in the books. Worse thing to happen here is to have Emera , Fortis, or a Florida Electric to buy them …. 😉

        Reply
  2. renewable energy stocks only reliable income is from selling carbon credits. Without those, they are all losers. they may get better, but will likely be driven mainly by govt edict.
    the current frenzy is from the climate control zealots, who persist in believing CO2 is a bad thing, ignoring all the evidence that it’s a major support of life.
    they are a poor investment for the long term, unless madated by govt.

    Reply
    • Sorry, I disagree with your statement. Renewable energy company can be profitable and we should all move toward more renewable energy production. It’s not just about carbon credits, it’s more than that.

      Reply
      • I agree they ‘can’ be profitable , but with the grants, credits and 0% interest loans, green schemes , and so on , its hard to assess their profitability from my end , when you start digging. Sure AQN ( I own), NPI (I own ) and maybe even Brookfield Renewable if you could figure out their accounting , raw AFFO’s etc , are good bets . We will see how renewable Energy handles things in California this summer and other ares . This will be the benchmark for renewable energy going forward. Formats of renewable or energy, such as geothermal, Nuclear, Hydro, are safe for bets for profitability and proven then either new or forms of renewable energy.

        Reply
    • Bob – I would take another look at , at least , AQN . Fantastic company, proven hydroelectric grid, and a constant moneymaker. With the hydroelectricity there isn’t too much government interference so their profit and easy to follow on the balance sheets. With some of their other green technologies it’s less apparent, in their other lines of income. Excellent management too ! More or less the same for NPI . Have a great day Guys !

      Reply
  3. Renewable energy is tricky as most renewable is not profitable , per se ( with exception of Hydro electricity and geothermal, nuclear) . I feel more comfortable investing in renewables that are heavey into the three more profitable areas. The mix that AQN has and NPI is more solid in my opinion …. BEP , is very hard to evaluate(typical Brookfield) . They have a growing revenue , but profitability is hard to judge in my opinion. Happy investing guys ! JamesV

    Reply

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