The UK government has just published its energy security strategy. It is timely, considering the rising costs of energy for the country’s households. Commodity prices were already heating up last year. And the Russia-Ukraine war has put further stress on oil and gas prices. Enter renewable energy, and for the purpose of this article, renewable energy stocks.
The strategy document intends to increase the pace at which the UK will now produce green energy in the country. This, of course, is a positive for FTSE stocks that are clearly in the right sector at the right time. I particularly like two such.
SSE is a growth and dividend stock
The first is FTSE 100 renewable energy generator SSE, which I hold in my investment portfolio already. There is plenty that is right with the stock. It is the UK’s biggest producer of green energy. Its financials looked good at the last count. And it has a decent dividend yield of 4.5%.
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Now, it might not be inflation beating, given its sky-high levels. In February, it touched 6.2% on a year-on-year basis. And it could increase more over the course of the year. But there is also another reason that the dividend yield is lower than inflation.
That is the increase in SSE’s share price. Over the past year, the stock has risen by some 20%. As a result, its dividend yield looks muted. Moreover, it is in any case higher than the FTSE 100 average dividend yield of 3.5%.
The Renewables Infrastructure Group’s impressive dividend yield
If SSE beats the FTSE 100 average yield, the next renewable energy stock I am talking about here, The Renewables Infrastructure Group, is placed even better. It is a part of the FTSE 250 index and the average index yield is 2.4% right now. The company, by comparison, boasts a dividend yield of more than double that, at 4.8%.
The company is actually a fund that invests in wind and solar energy projects across the UK and other parts of Europe. It has seen robust performance in the past year, which gives me encouragement about potential future growth in its dividends as well. Moreover, much like SSE, it has also offered capital appreciation in the past year as well. Its stock is up by some 15%.
What could go wrong
However, as positive as the signs look, on the ground implementation of strategy might be a different matter. Projects could take far longer to get off the ground than envisaged right now. And realistically speaking, there would be unforeseen speed bumps along the way even when they do. So, further increases in renewable energy stocks could be slower than expected.
Still, I think they are still worth buying with the long term in mind. The world is moving towards clean energy sources, and these companies are strong contenders to make the most of the trend.
