These 6 Hot Solar Stocks Defy the Odds

Almost anywhere you look in the market, you can find stocks with price-earnings ratios in the triple digits. But no sector makes this reality more evident than renewables. With that in mind, where should investors be looking for solar stocks to buy?

Small firms that have survived the boom-and-bust cycles of recent years are once again in fashion. And low interest rates means financing solar is a more compelling option for homeowners and businesses. Why? Solar creates more energy independence and helps property owners save money over the long term.

What’s more, if paired with a generator, solar becomes a way to lean less on the increasingly stressed, antiquated and unreliable energy grid.

But small companies are just one way to take advantage. As I mentioned last week, there are some big companies leading an eco-friendly shift in institutional investing.

Most of the best solar stocks to buy today are solid, large-cap stocks that have plenty going for them. And they help investors avoid the big premiums that typical solar plays command. Lastly, these six picks are all strong long-term investments.

  • NextEra Energy (NYSE:NEE)
  • Dominion Energy (NYSE:D)
  • Duke Energy (NYSE:DUK)
  • Xcel Energy (NYSE:XEL)
  • Hannon Armstrong Sustainable Infrastructure (NYSE:HASI)
  • Canadian Solar (NASDAQ:CSIQ)

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NextEra Energy (NEE)

Its regulated business may be the leading utility in southern Florida, but its unregulated business is the world’s largest producer of wind and solar energy.

And this is precisely the kind of stock I’m talking about here. It offers a steady, regulated utility business, so there’s a solid dividend and nearly guaranteed returns, as well as a business with a massive growth kicker.

Florida Power & Light (now FPL) was launched in 1928, and has been powering the second fastest-growing city and region in the United States.

In 2009, it became the largest renewable energy producer in the U.S. And it has grown that lead ever since. That size and scale makes it very attractive to businesses and other utilities that want to add renewable energy to their energy mix but can’t afford to build at scale.

The stock is up 30% in the past 12 months, and still delivers a nearly 2% dividend. But there’s plenty of upside left.

Dominion Energy (D)

With a $66 billion market capitalization, Dominion is one of the biggest utilities on the East Coast. With 7 million customers, its prime service area includes the Washington, D.C. metropolitan area including the Pentagon, as well as Tidewater Virginia, where one of the biggest shipyards and a significant number of armed forces sit.

In recent years, Dominion was focused on taking advantage of its natural gas properties in the Marcellus Shale and elsewhere. The industry was converting coal-fired plants to natural gas, and there were enormous export possibilities present.

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But it ran into significant headwinds building pipelines out of the Marcellus to distribution centers in Virginia and North Carolina. Even as it prevailed in court, it sold most of its gas pipeline and production business to Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B).

Now, it’s plowing that cash into expanding its solar and wind operations. And Wall Street is loving it. It’s up about 4% in the last year and has a 4.7% dividend as well.

Duke Energy (DUK)

This North Carolina-based utility has been a leader in alternative energy resources for decades.

DUK has about 7.8 million customers across the Carolinas, Florida, Ohio, Kentucky and Indiana. In the old days, King Coal powered the plants that generated electricity for these markets, since most of its service area was in or very near coal country.

But it started to realize that East Coast coal was a dwindling — and dirty — resource and saw the need to pivot to more efficient and cheaper resources. That transition has been underway for decades. And now, DUK is a leader in utility-scale renewable energy distribution and development.

DUK stock is off about 8% for the year, but its 4.6% dividend gets you back close to breakeven. It’s a great long-term pick for investors looking for stable, investor-friendly growth.

Xcel Energy (XEL)

Usually, there’s not a lot of news about upper-Midwest companies unless they’re exploration and production companies, agriculture firms or mining companies.

XEL is a Minnesota-based utility with 3.7 million electric and 2.1 million natural gas customers in its home state, as well as the Dakotas, Colorado, Michigan, Wisconsin, Texas and New Mexico.

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In a region where there’s plenty of coal and natural gas, XEL was the first major corporation to declare that its electricity generation was going 100% carbon-free by 2050, and 80% carbon-free by 2030. That’s a big deal.

It has significant plans to add solar and wind from now to then. And that will transform energy systems in the High Plains.

XEL stock is up almost 13% in 2020, but it remains a bargain. That’s why Xcel Energy is one of the best solar stocks to buy.

Hannon Armstrong Sustainable Infrastructure (HASI)

Beyond the great long-term choices the utilities here offer, this is a hidden gem that has been overlooked by the broader market.

And, it is a great play for two reasons. First, it is set up as a real estate investment trust (REIT), which means it pays you its net profits in the form of dividends.

Second, its primary focus is the financing, development and installation of renewable energy projects. And most of these projects have state or federal backing, so the financing is rock solid, as well as the rents.

At this point, HASI sports a $2.8 billion market cap, and it’s about as expensive as the average S&P 500 stock, even in this hot sector. Plus, it’s up nearly 45% in the last year and still delivers a 3.4% dividend.

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Canadian Solar (CSIQ)

I’m sure some of you are hankering for a pure-play solar company, so I found one that avoids the triple-digit valuations that most firms have at this point.

That other danger to avoid is buying companies that have a lot of potential, but don’t have the established markets to make it work. If you remember SolarCity, a solar company that was bankrolled by billionaire Elon Musk, it could barely make it through the troughs and valleys and was finally absorbed into Tesla (NASDAQ:TSLA). It’s not easy.

But CSIQ doesn’t have those problems because its main market, as its name suggests, is Canada. But it has subsidiaries in 20 countries on six continents including 17 manufacturing facilities in Asia and the Americas.

It has shipped over 46 gigawatt modules and currently sits on a 15-GW production backlog, which means CSIQ has plenty of business to keep it going, even during a global pandemic.

What’s more, it has a U.S. division, Recurrent Energy, that has 2.4 GW of projects up and running in the U.S. and a 7-GW project pipeline.

CSIQ stock’s trailing P/E is still below 6 times and it’s up 17% in the past year. It has a $1.5 billion market cap, so it’s not huge, but it’s big enough for institutions to buy in.

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