Renewable energy stocks are the future. I’d buy these FTSE 250 shares

Renewable energy stocks have outperformed the market over the past few years. This Fool analyses two FTSE 250 shares to capitalise on the trend. 

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As countries around the world seek a zero-carbon future, renewable energy is of ever-increasing importance. In fact, the third quarter of 2019 marked the first time in the UK that more electricity has come from renewable sources than from power stations. This has added to the misery of the oil sector, which is currently volatile and risky. As such, I believe that these two stocks are an ideal way to profit from the popularity in renewable energy.

A diversified renewable energy stock

The Renewables Infrastructure Group (LSE: TRIG) is one of my preferred renewable energy stocks. TRIG is a FTSE 250 investment company with a diversified portfolio of over 70 wind and solar farms across the UK and Europe. This portfolio has the largest generating-capacity of the London-listed renewables investment firms.

One reason I particularly like TRIG shares is because of its very strong balance sheet. To make acquisitions, the company uses its revolving credit facility (RCF) and this is repaid from new equity issues. This means that TRIG is debt-free. As such, I think that the firm is in a strong position to deal with falling electricity prices.

TRIG revenues are also largely government-backed and this should ensure stability in the long term. Its own estimates have also predicted that 75% of revenues in 2020 will come from UK, French and German governments. I believe that these government-backed revenues are safe due to legislation requiring countries to strive for a zero-carbon future. This includes the Climate Change Act 2008 and EU environmental policies.

Finally, TRIG shares pay a very strong, reliable and growing dividend that currently yields 5.5%. With dividends from other sectors looking increasingly unstable, I would argue that renewable energy stocks could be the future for dividend investors. This is especially pertinent after dividend cuts in the oil and financial sectors.

The leading renewable infrastructure fund

The other renewable energy stock I’d buy is Greencoat UK Wind (LSE: UKW). This firm is a leading renewable investment fund with 36 operating wind farm investments in the UK. It has also committed to further expansion, which should help harness future growth.

Once again, a major appeal of this stock is the dividend. It yields just over 5% and there has always been a big commitment to the dividend. For example, the company said that it aims “to provide investors with a sustainable dividend … that increases in line with RPI inflation”. Therefore, this FTSE 250 stock is a very attractive proposition for any income investor, I feel.

In conclusion, I’d buy these two stocks to profit from the popularity of renewable energy. While lower energy demand has negatively impacted the sector, a need for cleaner energy will increase its resilience in the near future. This means that I rate these two renewables stocks as ‘buys’ for the long term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stuart Blair owns shares in The Renewables Infrastructure Group. The Motley Fool UK has recommended Greencoat UK Wind. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »