Summary: The renewable energy sector has undergone remarkable growth in recent times, propelled by technological advancements and our awareness of the need to address climate change and find greener solutions to our industrial needs. In this guide, we explore the 5 best solar stocks for those looking to engage with a promising industry and contribute to a future of long-term sustainability and health. To buy the solar stocks on our list, investors can register an account at an online broker such as eToro.
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Renewable energy stocks
Renewable energy stocks are stocks issued by companies involved with channeling renewable sources, such as wind, water, and biomass, as well as companies focused on furthering technologies employed in the sector.
Tese companies often operate across a diverse range of businesses. Some of them focus on developing equipment, such as solar panels and wind turbines. Others are involved in the construction of renewable energy projects, for example, solar farms and hydroelectric plants. Additionally, they can support companies in unrelated sectors and help them generate their electricity from renewable sources.
As these companies help the environment and provide potential long-term growth opportunities in a rather large area of business operations, their stocks are an enticing diversification option for a lot of investors.
However, while investing in renewable energy stocks, it’s essential to consider the risks associated with the sector. For example, market volatility, technological innovations, and public sentiment can significantly impact the performance of most renewable energy stocks. To minimize the risks, it is wise to diversify your portfolio by investing in more than one company. Alternatively, you can invest in funds that can give you exposure to various companies in the renewable energy sector simulatenously.
Why invest in renewable energy?
Renewable energy sources, like wind, solar, and hydroelectric power, are on the rise, especially the electric vehicle (EV) market. Thus, investing in renewable energy stocks has a number of advantages:
- First, renewable energy is generating a lot of buzz as the kind of fuel that can fuel the future. With constant global efforts to combat climate change, a lot of green-conscious countries are investing in and slowly adopting clean energy alternatives to combat things such as greenhouse gas emissions. In this kind of environment, renewable energy companies are likely to benefit from increased industrial demand, positive client sentiment, and favorable regulatory policies;
- Second, investing in renewable energy stocks allows you to diversify your portfolio. By spreading your investments across various sectors and industries, you can reduce the risk of significant losses if one of your assets starts performing poorly. In addition to stocks, you can invest in exchange-traded funds (ETFs) focusing on renewable energy to further diversify your holdings;
- Finally, investing in renewable energy aligns well with impact investing and environmental, social, and governance or ESG investing. That is, by supporting renewable energy companies, you help reduce our carbon footprint, clean up the environment, and improve public health. Naturally, as consumers become more environmentally conscious, the demand for clean energy solutions is expected to grow. Consequently, green trends could translate to higher returns on your investments in renewable energy stocks.
Top 5 solar stocks to buy
There are a lot of renewable energy companies that have come into the spotlight in recent years. Some of the consistently most profitable ones include:
| Company | Ticker symbol | Market capitalization (2023) |
| NextEra Energy | (NYSE:NEE) | $150 billion |
| First Solar | (NASDAQ:FSLR) | $19.7 billion |
| Brookfield Renewable | (NYSE:BEP) | $8.1 billion |
| Sunrun | (NASDAQ: RUN) | $3.79 billion |
| Clearway Energy | (NYSE:CWEN) | $3.3 billion |
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NextEra Energy (NEE)
NextEra Energy (NYSE: NEE) is one of the largest electric power companies in the U.S., with over $50 billion in new investments as of August 2023. It focuses on clean and renewable energy generation through their subsidiaries (such Florida Power & Light (FPL), NextEra Energy Resources (NEER), and Gulf Power Company). With a strong track record and commitment to reducing carbon emissions, its stock can give you solid exposure to the renewable energy sector.
NextEra Energy enjoys a good reputation among past investors, as it has seen a total return of nearly 669% in the past half a decade or so. That is in addition to its annual dividend rate of 2.72% and targeted annual range of 6% to 8% growth until at least 2026.
NextEra Energy stock price
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First Solar (FSLR)
As one of the world’s leading providers of solar energy solutions, First Solar (NASDAQ: FSLR) stock allows investors to gain some easy and relatively low-risk exposure to the growing solar power industry.
What makes First Solar a solid choice is its:
- Approach to technological innovation (for example, with its tin and Cadmium Telluride (CadTel) panels);
- Focus on the domestic U.S. market;
- Rapid expansion.
As of 2023, the company seems to be mostly future-oriented, having worked on contracts extending into 2029 for panel sales. However, it also expects its earnings will grow from $7.55 per share to $13.23 per share in the next year, which makes it a solid short-term investment option, too.
First Solar stock price
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Brookfield Renewable (BEP)
Brookfield Renewable (NYSE: BEP) is a leading global renewable energy company with a diverse portfolio of resources, including solar, wind, and hydroelectric assets (both off- and on-shore), the last of which constitutes about 50% of the company’s portfolio. The company’s primary revenue stream comes from long-term Power Purchase Agreements (PPAs), ensuring a consistent influx of cash.
Brookfield has been proving its mettle since the days of its founding, maintaining an annualized total return of 16% on the New York Stock Exchange. Moreover, the company is targeting a dividend yield somewhere between 5% and 9% annually, which can solidify its status as a solid choice among solar stock investors.
Brookfield Renewable stock price
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Sunrun (RUN)
Sunrun (NASDAQ: RUN) is a residential solar energy company focused on installing and maintaining solar panels for homeowners across the United States. With a commitment to making solar energy accessible and affordable, Sunrun is in a good position to seize a significant market share as the demand for residential solar solutions grows. In fact, it was the fourth most-searched renewable energy stock on Google by monthly searches in 2022 already.
In the second quarter of 2023, the company disclosed unexpected earnings of $55.5 million, or 25 cents per share, which went contrary to the expected loss of 24 cents per share. Still, it must be mentioned that even though the total revenue experienced a 1% increase, reaching $590 million, it fell short of the projected $628 million.
Sunrun stock price
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Clearway Energy (CWEN)
Clearway Energy (NYSE: CWEN) operates a diversified portfolio of renewable energy generation assets, including wind, solar, and natural gas, with over 5,500 net MW of wind and solar generation projects across the United States.
In 2022, Clearway Energy divested its thermal business, resulting in cash proceeds of $1.29 billion later channeled towards the expansion of its renewable energy endeavors. Now, the company is in the position to push its dividend growth toward the upper range of its annual target of 5% to 8%, a trajectory it anticipates sustaining until 2026 at the very least.
Clearway Energy stock price
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Renewable energy indexes and funds — an alternative option
Clean energy ETFs are a type of exchange-traded funds that focus on solar stocks within the renewable energy sector. By investing in clean energy ETFs, you can quickly diversify your investment portfolio without the need for constant active engagement with your investment. Additionally, compared to mutual funds, ETFs generally come with lower expense ratios.
Some of the better performing renewable energy ETFs to check out in 2024 include:
- The WilderHill Clean Energy Index (ECO): An index tracking some of the major companies involved in the renewable energy sector, some of which have market capitalization of up to $200 million;
- Invesco Solar ETF (TAN): This index specializes in solar energy, so it is not as diversified, but it includes companies such as First Solar (FSLR )and Enphase Energy (ENPH);
- First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN): Another index tracking some of the major companies in the sector with market caps of over $150 millin;
- The WilderHill New Energy Global innovation Index (NEX): An index tracking major players in the sector with a special focus on companies outside the U.S.
Conclusion
Investing in renewable energy is a forward-thinking investment decision that can have both short- and long-term benefits. As the world moves towards cleaner energy sources, the demand for renewable energy continues to increase. Indeed, the industry is expected to grow with a compound annual growth rate (CAGR) of 16.9% from 2023 to 2030.
However, when making investments in the renewable energy sector, it’s important to stay informed and be aware of potential risks. By staying updated on industry trends and policy changes, you’ll be better equipped to make informed decisions. Consequently, your investments in renewable energy will not only have the potential to provide financial returns but also contribute towards a sustainable future.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about how to buy solar stocks
What are renewable energy stocks?
Renewable energy stocks are shares in companies involved in producing energy from sustainable sources like solar, wind, and hydro power.
How to invest in renewable energy stocks?
To invest in renewable energy stocks, you can open a brokerage account, for example, at eToro, research renewable energy companies, and buy shares in those companies that seem profitable.
Are renewable energy stocks a good investment?
Renewable energy stocks can be a good investment thanks to growing environmental concerns and increasing demand for clean energy. However, like all investments, they carry risks, so never invest what you cannot afford to lose.
What are the most popular renewable energy stocks?
Popular renewable energy stocks include companies like NextEra Energy (NEE), Brookfield Renewable (BEP), First Solar (FSLR), Sunrun (RUN), and Cleraway Energy (CWEN).
Are solar stocks the same as renewable energy stocks?
All solar stocks are renewable energy stocks, but not all renewable energy stocks are solar stocks. Renewable energy stocks are a broader category, including shares in companies engaged in all green energy and renewable energy sectors.
What are the best solar energy stocks to buy?
The best solar stocks to buy include NextEra Energy, First Solar, Brookfield Renewable, Sunrun, and Clearway Energy. These companies are prominent players in the solar and renewable energy market, offering a range of investment opportunities in the growing sector of sustainable energy.
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