Best Renewable Energy Stocks

Top Canadian Renewable Energy Stocks

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, there is a potential to earn more money by investing early. You want to do your research to understand if your investment is in the storage of clean energy or the production of clean energy or both.

Now, while there are pure play renewable energy stocks, you should know that all the big players in the utility sector are actively pursuing renewable energy. 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.

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 consists of 59% of the 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 green gas emissions.

Best Canadian Renewable Energy Stocks

Unlike a regular utility stock, renewable energy stocks need to be looked at from a potential perspective. They don’t feed the massive population just yet. They don’t reach homes the way Emera, Fortis or Hydro One do. Algonquin Power & Utilities Corp, the largest clean energy stock by market capitalization, servers 750,000 customers across 12 US states. In comparison, Fortis servers 3.3 millions customers across all subsidiaries..

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

But in the case of clean 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, it’s not all acquisitions that fit the bill and it’s not easy to setup clean energy infrastructure where it’s needed. There are a couple of ways I can think of a renewable energy company can grow and it’s 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 labor.

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?


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All Utility Stocks

As mentioned earlier, have a look at all the utility stocks before you just focus on the pure play clean energy stocks. Here is the list of Canadian utility stocks sorted by market capitalization.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:FTSFTSFortisUtilitiesUtilities - Regulated Electric0.6752.4624.3214.0321.513.740.03643.640.510741.910.094458Tollbooth - RegulatedNOYESYESNOCanada1
TSE:BIP.UNBIP.UNBrookfield Infrastructure PartnersUtilitiesUtilities - Diversified0.6755.7117.0669.5521.510.800.05245.243.648942.150.144577Tollbooth - RegulatedYESYESNONOCanada1
TSE:HHHydro OneUtilitiesUtilities - Regulated Electric0.4825.7515.3918.5521.511.390.03943.940.729841.010.081335Tollbooth - RegulatedNONONONOCanada1
TSE:EMAEMAEmeraUtilitiesUtilities - Diversified0.7053.8713.1815.0421.513.580.04554.550.684442.450.105369Tollbooth - RegulatedNOYESYESNOCanada1
TSE:BEP.UNBEP.UNBrookfield Renewable Partners L.P.UtilitiesUtilities - Renewable0.4966.9411.980.0021.51-0.370.04404.401.000042.170.073337Tollbooth - UnregulatedNONONONOCanada1
TSE:CUCUCanadian UtilitiesUtilitiesUtilities - Diversified0.7134.459.3811.3721.513.030.05065.060.574841.740.141959Tollbooth - RegulatedNOYESYESNOCanada1
TSE:AQNAQNAlgonquin Power & Utilitties CorpUtilitiesUtilities - Renewable0.7517.689.3217.6521.511.000.04764.760.842340.620.134378Tollbooth - UnregulatedNONOYESNOCanada1
TSE:NPINPINorthland Power Inc.UtilitiesUtilities - Renewable0.4834.336.6617.9621.511.910.03503.500.6283121.200.045535Tollbooth - UnregulatedNONONONOCanada1
TSE:ACO.XACO.XAtcoUtilitiesUtilities - Diversified0.6841.274.709.7021.514.250.04224.220.409641.740.166468Tollbooth - RegulatedYESYESYESNOCanada1
TSE:ALAALAAltaGasUtilitiesUtilities - Regulated Gas0.6416.034.4810.5821.511.520.05995.990.6316120.960.059936Tollbooth - RegulatedNONONONOCanada1
TSE:RNWRNWTransAlta Renewables Inc.UtilitiesUtilities - Renewable0.5514.503.8636.1521.510.400.06486.482.3490120.940.086945Tollbooth - UnregulatedNONOYESNOCanada1
TSE:INEINEInnergex Renewable Energy IncUtilitiesUtilities - Renewable0.5019.533.400.0021.51-0.520.03693.691.000040.720.036947Tollbooth - UnregulatedNONOYESNOCanada1
TSE:BLXBLXBoralex Inc.UtilitiesUtilities - Renewable0.4031.533.040.0021.51-0.320.02092.091.000040.660.069855Tollbooth - UnregulatedNONOYESNOCanada1
TSE:CPXCPXCapital Power CorporationUtilitiesUtilities - Independent Power Producers0.4528.142.96215.1721.510.130.06826.8214.769241.920.140256Tollbooth - UnregulatedNONOYESNOCanada1
TSE:TATATransAltaUtilitiesUtilities - Independent Power Producers0.348.252.2816.0521.510.510.02062.060.333340.170.020604Tollbooth - UnregulatedNONONONOCanada1
Get your list of STRONG Dividend Growth Stocks

Top 3 Renewable Energy Stocks

Going by the Dividend Snapshot Opportunity Score – a pure 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 really need to review the qualitative aspect of the company.

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

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:BEP.UNBEP.UNBrookfield Renewable Partners L.P.UtilitiesUtilities - Renewable0.4966.9411.980.0021.51-0.370.04404.401.000042.170.073337Tollbooth - UnregulatedNONONONOCanada1
TSE:AQNAQNAlgonquin Power & Utilitties CorpUtilitiesUtilities - Renewable0.7517.689.3217.6521.511.000.04764.760.842340.620.134378Tollbooth - UnregulatedNONOYESNOCanada1
TSE:NPINPINorthland Power Inc.UtilitiesUtilities - Renewable0.4834.336.6617.9621.511.910.03503.500.6283121.200.045535Tollbooth - UnregulatedNONONONOCanada1
TSE:RNWRNWTransAlta Renewables Inc.UtilitiesUtilities - Renewable0.5514.503.8636.1521.510.400.06486.482.3490120.940.086945Tollbooth - UnregulatedNONOYESNOCanada1
TSE:INEINEInnergex Renewable Energy IncUtilitiesUtilities - Renewable0.5019.533.400.0021.51-0.520.03693.691.000040.720.036947Tollbooth - UnregulatedNONOYESNOCanada1
TSE:BLXBLXBoralex Inc.UtilitiesUtilities - Renewable0.4031.533.040.0021.51-0.320.02092.091.000040.660.069855Tollbooth - UnregulatedNONOYESNOCanada1

#3 – Brookfield Renewable Partners L.P.

Brookfield Renewable Partners is a globally diversified owner and operator of renewable energy assets. It is a subsidiary of Brookfield Asset Management, a major global infrastructure company, having a 60% ownership in the firm. Brookfield Renewable Partners has a presence in North America (60% of the operating portfolio), Brazil (20%), Colombia (15%), and Europe and Asia (5%). It has over 100 years of experience in power generation and is one of the largest public pure-play renewable energy businesses globally. Hydroelectric power constitutes the majority of Brookfield’s portfolio (75% of the operating portfolio), followed by wind and solar energy (balance 25%). The firm owns power assets worth $47 billion, 880 generating facilities and a renewable energy capacity of more than 17,400 MW. Brookfield Renewable Partners’ large portfolio of assets located across politically stable countries and growing demand for renewable energy power sources are its biggest strengths. The company enjoys good visibility to secured cash flows since almost 90% of it are contracted under long-term power purchase agreements with creditworthy counterparties.

Investment Data

#2 – TransAlta Renewables Inc.

RNW - TransAlta RenewablesTransAlta Renewables is a renewable energy company and one of the largest generators of wind power in Canada. It is a sponsored vehicle of TransAlta Corporation. With more than a century’s experience under its belt, TransAlta Renewables has developed a rich experience of owning, operating, and maintaining a large fleet of power generation assets. TransAlta Renewables owns and operates 21 wind farms, 13 hydroelectric facilities, seven natural gas plant, one solar facility and one natural gas pipeline in the US, Canada, and Australia. Highly contracted renewable and natural gas power generation assets, and long-term contracts with strong counterparties ensure stable cash flows for the company. Most of its wind, hydro and gas facilities have an established track record of operating history and performance. TransAlta Renewables owns renewable energy facilities across different regions and multiple technologies. The company owns directly or through economic interests more than 2,400 MW of net generating capacity and are strategically located to supply growing industrial regions.

Investment Data

#1 – Algonquin Power & Utilities Corp

AQN - Algoquin Power & Utilities CorpAlgonquin Power & Utilities is a diversified utility company in North America with $10 billion in total assets. The company engages in the generation, transmission, and distribution of water, gas, and electricity to communities across the U.S. It also has renewable energy business. As a growing renewable energy company, Algonquin Power owns a strong portfolio of long term contracted wind, solar and hydroelectric assets with 1.5 GW of total installed capacity. The company through its subsidiaries owns an equity interest in more than 39 clean energy facilities. Algonquin Power operates through two subsidiaries: Liberty Utilities (64% of 2018 earnings) and Liberty Power (36%). The company has more than 50 power generation facilities and 20 utilities across North America. Algonquin’s utility business serves nearly 770,000 customers in twelve states across the U.S., through 1,200 miles of electrical transmission lines and 100 miles of natural gas transmission pipelines.

Investment Data

Opportunity Score Formula

The top 5 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 are interested in more details, the Canadian Dividend 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.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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