Best Canadian Renewable Stocks In Canada For February 2024

Dividend Earner

Dividend Earner

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5 min read Affiliate Disclosure

Renewable energy is good for the planet and can be good for your portfolio as well. Since it’s also in the early stages of development, it can earn more money by investing early.

The time is now to focus on renewable energy as we have reached peak oil according to Bloomberg. With the new US administration friendly towards renewable energy, there will be many more projects.

On a separate note, they expect the cost of electric cars to match that of ICE cars in a couple of years as battery technology improves.

While there are pure-play renewable stocks, you should know that all the big players in the utility sector are actively pursuing renewable energy. Focusing only on pure play might mean you missed out on a transformation by the big regulated utilities. In the end, are you in to profit from stocks, or be green?

They are much bigger and could probably buy the pure-play renewable energy stocks. You should not ignore them and understand what their strategy is when it comes to clean energy.

What Is a Renewable Energy Company

Before we look into investing in clean energy, let’s identify what consists of renewable energy. Renewable energy comes from natural resources that cannot be depleted such as water, solar rays or wind to name a few.

The most common renewable energy resources are hydropower, solar, wind and geothermal. In Canada, hydropower already accounts for 59% of electricity generation.

As you can guess, all Canadian utility stocks have some clean energy but are not exclusively focused on clean energy but are putting plans together to reduce non-clean energy to reduce greenhouse gas emissions.

Other renewable energy sources include biodiesel, ethanol, solar, tidal, and wind.

Considerations for Choosing Renewable Energy Stocks

Unlike regular utility stocks, renewable stocks must be looked at from a potential perspective. They haven’t reached the massive population yet, and while proven, it is not yet entirely in place outside of hydroelectricity.

They don’t reach homes the way Emera, Fortis, or Hydro One do. Algonquin Power & Utilities Corp only servers 750,000 customers across 12 US states. In comparison, Fortis serves 3.3 million customers across all subsidiaries.

Generally speaking, when investing in stocks, you have a 3 part analysis:

  • Quantitative Analysis – 40% of your analysis
  • Qualitative Analysis – 40% of your analysis
  • Insights – 20% of your analysis (My tollbooth analysis comes to play here)

But in the case of renewable energy stocks, you need to increase your insight, and that’s a tough one. Since they need to use clean energy to serve their customers, not all acquisitions fit the bill, and it’s not easy to set up clean energy infrastructure where it’s needed.

There are a couple of ways I can think of a renewable energy company that can grow, and these are through acquisition or clean energy development. One is much easier than the other and much faster.

I expect to see consolidation, but a proper investment in clean energy infrastructure is important for their business, and it takes time to develop and see the fruit of labour. Imagine how long it took to build a railway infrastructure across Canada or how much work it is to maintain a wireless infrastructure through the vast inhabited landscape of Canada.

On the flip side of the investment thesis, can a regular utility catch up and change their fossil fuel energy production to a clean solution? Can they do it faster than the pure-play clean energy stocks?

All Utility Stocks

As mentioned earlier, look at all utility stocks before you focus on pure-play clean energy stocks. Here is a list of Canadian utility stocks sorted by market capitalization. Most are involved in the transformation but profit from other sources.

Best Canadian Renewable Energy Stocks

Going by the Dividend Snapshot Opportunity Score – a purely quantitative approach – the following are the top Canadian bank stocks. When the score is within a 5 to 10-point range, that’s when you need to review the qualitative aspect of the company.

Before identifying the top 3 stocks, here is the complete list of dividend renewable energy stocks.

Ticker Ticker Company Market Cap P/E Yield Aristocrat Graph SectorID IndustryID
BEP.UN TSE:BEP.UN Brookfield Renewable Partners 10.88 0.00 5.10 NO 1 12 109
BEPC TSE:BEPC Brookfield Renewable Partners 7.72 4.21 4.51 NO 1 12 109
NPI TSE:NPI Northland Power 5.98 0.00 5.15 NO 1 12 109
AQN TSE:AQN Algonquin Power & Utilities Corp 5.91 0.00 6.91 NO 1 12 109
BLX TSE:BLX Boralex 3.55 39.31 1.91 NO 1 12 109
RNW TSE:RNW TransAlta Renewables 3.43 44.02 7.31 NO 1 12 109
INE TSE:INE Innergex Renewable Energy 1.99 0.00 3.69 NO 1 12 109
PIF TSE:PIF Polaris Infrastructure 0.29 18.62 5.94 NO 1 12 109
TSE BEP UN SMALL

Brookfield Renewable Partners

tse:bepc | Utilities | Utilities - Renewable

TSE NPI SMALL

Northland Power

tse:npi | Utilities | Utilities - Renewable

TSE EMA SMALL

Emera

tse:ema | Utilities | Utilities - Regulated Electric

Opportunity Score Formula

The top stocks identified above are based on a score calculated using a number of financial data points from the companies. In the end, the score is generated from following five key indicators:

  • 52-Week Range: Trend over the past 52 weeks. Is the stock pulling back from a 52 week high?
  • P/E Ratio: Is the stock price running away from its earnings?
  • Revenue Growth: Is the revenue growing? Growing revenue is important. We don't want to be fooled by share buybacks and cost management only.
  • Dividend Yield: Is the yield attractive? Usually could identify a pullback if the yield starts to go up or major trouble if it goes too high.
  • Dividend Growth: Uses dividend growth and the Chowder Rule. Is the company capable of growing the dividend consistently?
  • Dividend Payout Ratio: Uses historical averages to put today's ratio in perspective. Is the company able to grow the dividend at the same rate it increases its earnings?

The generated score is meant to assess an entry point opportunity based on historical and today's numbers. It completely ignores the business quality, the quality of the company is for every investor to assess. My stock selection process breaks down the quantitative and qualitative assessments investors should establish to pull the trigger before buying.

If you want more details, the Dividend Snapshot Screener provides many more data points to help make your investment decision.

Dividend growth investing works and you can generate a healthy retirement income but you have to buy individual stocks. If you are not comfortable with holding individual stocks, you can always buy dividend ETFs or consider different passive income ideas to generate a retirement income.

Renewable Energy Stock FAQs

What is the largest renewable energy stock?

To date, the largest company is Brookfield Renewable Partners. Brookfield in general is very active in the merger & acquisition space.

What is the best renewable energy source in Canada?

The best renewable energy source in Canada by far is hydro with wind turbine picking.

Boralex is going to benefit from projects in Quebec and the democrats in the coming years.