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.
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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.
