FTSE 100 shares in the energy sector have witnessed a huge surge in profits over 12 months. Like many investors, I am looking at shares in the industry that could supercharge my portfolio. While there are several good stocks on offer, I have identified two showing explosive growth potential over the next decade.

But first, why are renewable energy shares witnessing historic levels of interest right now? I think the COP 26 summit last year triggered the perfect storm for a transition to cleaner energy. While governments increased focus on green alternatives, crude oil prices rose after Russia’s invasion of Ukraine. This added fuel to the green energy lobby and countries are now scrambling to secure sustainable alternatives to meet the power demand.

With money pouring into Europe’s thriving energy sector, I think this is the perfect time to invest.

FTSE 100 shares I’d buy to capitalise

The first company on my list is SSE (LSE:SSE). The FTSE 100 giant has the largest renewable electricity portfolio in the UK and Ireland. It specialises in onshore and offshore wind as well as hydropower. The company sells and distributes its energy to UK’s power grid.

In the financial year (FY) 2021, SSE generated £6.83bn in revenue and a total income of £2.28bn. These figures jumped significantly in FY 2022 when the company generated a revenue of £8.61bn and recorded an income of £3bn. The 33% jump in income comes primarily from its renewables wing.

Thanks to this strong showing, the FTSE 100 share has gone up 15.4% in the last six months. And despite this jump, it is still trading at a price-to-earnings ratio of 7.7 times. SSE shares also come with a healthy 4.6% yield making it really cheap right now

The other company on my watchlist is Centrica (LSE:CNA), a power transmission and delivery company with 11.7 gigawatts (GW) of renewable power under management.

Centrica operates British Gas, which powers millions of homes in the country. Centrica has been adding services like installing EV chargers to help consumers hit net-zero emissions as well. The company also owns a 20% stake in UK’s nuclear energy bank which is considered one of the cleanest sources of energy today.

The FTSE 100 share saw its dividend reinstated last month after the company saw revenue jump a whopping 2,851.22% in 2021 to £1.21bn. Although this is in comparison to a terrible 2020, the bounce back is significant. The energy giant also presented a stronger balance sheet, repaying the £93m debt from 2021.

Concerns and verdict

While both companies look financially strong right now, it is worth noting that energy prices play a major role here. When energy prices stabilise, profits could trend back towards pre-pandemic levels. This will slow down the investor interest in these two FTSE 100 shares.

Right now, both companies have a strong cash flow. But as we move closer to UK’s net zero ambitions, R&D budgets and asset purchases will increase, which could affect future results.

However, given the size, reach, and finances of these two companies, I think they are the best FTSE 100 energy shares for my portfolio right now. Depending on share price performance, I may be tempted to make a £1,000 investment in both in the coming months.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The renewable energy lobby has witnessed a massive surge over the last two years. World leaders are finally acknowledging the need to phase out fossil fuels. Latest projections show that over £850bn will be funnelled into the sector this decade via grants and investments, a huge boost for renewable energy firms.

The sector is red hot right now, with many top renewable energy shares across the world gaining momentum even as indexes fall. And I think I have zeroed in on an FTSE 100 name that looks like a winner for my long-term growth portfolio.

Riding the wave

SSE (LSE:SSE) shares have been outperforming the FTSE 100 index for some time now. Since the pandemic crash in March 2020, the Footsie has gone up 36.8% while the SSE share price is up 62%. This is largely due to the EU and the UK focussing on stronger collaborative renewable energy programs. And this revolution is led by wind and hydroelectricity, given the high potential for both in the region. And SSE is a market leader in both. 

The region has lofty ambitions when it comes to fighting climate change. The UK government recently detailed its Energy Security Strategy and the focus is on “homegrown power generation,” which includes a mix with 95% low-carbon power by 2030. This is great news for renewable energy production and distribution companies like SSE.

Is this FTSE 100 share the best growth option for me?

SSE Renewables focuses on onshore and offshore wind and hydroelectric power. SSE already owns nearly 2GW (gigawatt) of operational onshore wind capacity with over 1GW under development. The company also holds hydroelectricity resources capable of generating 1,459MW and an offshore wind portfolio estimated at 579MW across UK waters.

SSE wants to treble its renewable energy by 2030 to 50TWh a year. This includes a fully-funded £12.5bn investment by 2026, that will help ramp up clean power generation. The board also plans to power the increasing demand for EVs (electric vehicles) by supplying 20GW to charging ports across the country. 

In financial year (FY) 2022, the FTSE 100 company recorded total revenue of £8.6bn, up 26% from FY 2021. The board expects increased free-cash generation until 2026 and plans on growing its dividend by 5% per annum to FY 2026. 

These figures point to a business with a large market share operating in a healthy sector. And I consider them strong indicators of future growth. But there are some risks to consider as well. Regulations and currency fluctuations can impact SSE’s operations across UK, Scotland, and Ireland.  Also, analysts expect crude oil price fluctuations to settle in 2023. This could slow down the renewables push, impacting future profits. 

Governmental grants and regulations play a major role in energy prices. And the UK, which is witnessing financial and political turmoil, could tighten current renewable energy budgets if this inflationary period extends beyond 2022. This could increase taxes, stall development projects, and impact SSE’s performance. 

But this FTSE 100 stock looks like a robust renewable energy option for my portfolio right now. Given its strong presence in the UK, plans underway, and predicted jumps in revenue, I could be tempted to make a £10,000 investment if the current share price performance continues. 

The post Renewable energy boom: 1 top FTSE 100 share I’d buy appeared first on The Twelfth Magpie.

More reading

• How UK shares could build a £339,849 ISA

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Shifting winds

Greencoat UK Wind (LSE: UKW) has been on my FTSE 250 watchlist for a while now. And right now, it looks like the best renewable energy share for me. In recent times, market interest in this company has been immense. With its share price up 8.2% in the last month, the company has gained a lot of prominence since the Russian invasion of Ukraine. But I think this is more than just a reflex reaction to rising oil prices.

To understand the company’s mission, let us first look at UK’s overall offshore wind energy generation stats. The UK currently has 14GW (gigawatts) of offshore wind assets, of which 10.4GW is operational. While being one of the largest offshore wind energy producers in the world, the country has sanctioned more offshore projects capable of generating nearly 40GW, which could power over 10m homes in the country in the coming years.

And Greencoat could benefit immensely from this. The investment trust owns and operates wind farms and has been rapidly expanding its offshore portfolio. It currently has 43 wind farm investments across England, Scotland, Wales and Northern Ireland. Of this, 30% are offshore assets that are set to grow to 40% this year.

While expansion operations are underway, the company is earning a tidy profit from selling the energy it produces. Rather than speculate on rising stars, Greencoat is a stable business that has shareholder earnings in mind. The company is dividend-focused and the board has plans to increase its 4.73% yield in line with retail price index (RPI) inflation. And in times of heavy inflation, this is a bonus. And thanks to green energy grants, the company operates on strong margins which allowed it to generate £257m cash last year.

Concerns

While offshore farms generally generate more electricity than farms on land, they are also expensive to set up and maintain. And Greencoat’s push to increase offshore assets could eat into its cash reserves. This could also affect its dividend plan in the long run. And the pressure to increase output could put a strain on the industry. And I will be watching developments in this space closely in the coming months 

Despite the concerns, Greencoat still looks like the best renewable energy share for my portfolio given the dividend policy, strong balance sheet, and expansion plans. And while its current price of 151p, at a price-to-earnings ratio of 8.3 times, is attractive, I think I will wait for a correction this year before investing. 

The post Is this the best UK renewable energy share to buy right now? appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. 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.

I think this will result in an accelerated transition to renewable energy production across Europe. This could potentially create room for hydrogen fuel companies to flourish, particularly as a replacement for natural gas.

The benefits of hydrogen

Hydrogen is an abundant and reactive element with a lot of benefits to its adoption. We can produce it without releasing carbon dioxide. (Green hydrogen comes from running water through an electrolysis machine). Like oil or gas, we can burn hydrogen for heat or run it through a fuel cell to create electricity.

Hydrogen also acts as a store of energy. It must be pressurised and cooled but it can then be transported. Electricity loses energy the further it has to travel which is why we can’t power Europe with solar panels in the Sahara.

Use cases

One important use case is that hydrogen fuel could run industrial machinery. Electric cars function well enough on batteries, but heavier machines like buses, trucks, and diggers weigh too much. Just last year, JCB signed a multibillion-pound deal to supply green hydrogen to the UK, showing it recognises the possibilities hydrogen fuel offers.

Most importantly for the current moment, however, hydrogen could also be pumped into homes as a way to heat boilers and light gas stoves. Staffordshire university began mixing hydrogen into its gas supply back in 2020 and have seen no negative effects so far. The Energy Networks Association believes hydrogen could make up to 20% of all gas in the national grid by next year if policy makers are willing to make the switch.

Hydrogen shares

The UK has two home-grown companies that could exploit a sudden uptick in demand for hydrogen gas.

ITM Power manufactures the electrolysis machines needed to produce green hydrogen. The company announced several new expansions and partnerships over the previous year, but so far remains unprofitable. This doesn’t concern me too much at this stage. ITM has managed to consistently raise money without going into debt, showing a strong degree of investor confidence.

Another UK company I’d consider adding to my portfolio is AFC Energy. This Surry-based company manufactures the fuel cells needed to use hydrogen as a fuel. AFC has an advantage over its competitors because of a patent it owns on alkaline fuel cells. This new design can generate energy from lower purity hydrogen and is an innovation that could significantly reduce fuel costs for companies.

Unfortunately, AFC suffers from the same issue as ITM Power — unprofitability. However, I still believe it has great growth potential. I think once the demand for hydrogen increases, the market will be eager to find cost-cutting innovations like the ones AFC provide.

Final thoughts

There are a lot of risks in investing in companies like ITM and AFC. Hydrogen is not yet recognised as a highly valuable commodity. But current events in Europe have shown the important role renewables have to play. Not just for the green transition, but security.

Provided the companies can stay afloat over the coming years, hydrogen shares have the chance to explode in value. So I will be adding both ITM Power and AFC to my portfolio.

The post Hydrogen shares could boom as Europe pivots from Russian natural gas appeared first on The Twelfth Magpie.

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James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I believe renewable energy is the next great growth sector and early investors still have a chance to get in on the ground floor. It can be hard to know which companies will perform well in the future, but I believe AFC Energy (LSE: AFC), based in the UK, has what it takes to become the cornerstone of a new hydrogen economy.

Challenges in renewable energy

Renewable energy is a functional technology, but it is still in need of some development. If we are to achieve a sustainable net-zero goal, we must overcome several obstacles.

Intermittency and energy loss are the two most significant of those obstacles. Wind and solar energy are plentiful and clean, but they are intermittent. We can’t rely on them to provide all of our electricity 24 hours a day, seven days a week. Electricity also loses energy as it travels further, which is why solar panels in the Sahara can’t easily power homes in London.

AFC’s competitive edge

What we need, in my opinion, is a fuel that is energy-dense, transportable, and created from renewable resources. That fuel, I believe, is hydrogen. I also think that AFC Energy could pave the way for its adoption.

AFC specialises in building the fuel cells required to make hydrogen fuel work.

Its competitive edge comes from a patent it has on ‘alkaline fuel cells.’ These fuel cells operate with lower purity hydrogen fuel. Producing hydrogen fuel is currently costly and complex, especially at the purity levels necessary for fuel cell operation. Vehicles that employ alkaline fuel cells will be able to be run at a much lower cost, making them a no-brainer purchase for consumers and businesses alike.

Company fundamentals

2021 was an eventful year for the business. AFC Energy raised income, boosted orders, and produced several new products in 2021. The stock trades at 33.30p, which is a decent price given the company’s size.

However, throughout 2021, the value of the stock dropped 60%, which perplexed me at first. AFC is currently debt-free, and revenues are expected to increase by 100% this year.

In November 2020, the share price soared £350% when AFC announced it had shared its alkaline technology with its research partners. I believe that this vote of confidence in the technology generated a lot of investor excitement, which pushed the share price far beyond its fair value. The slow bleed over last year was just a market correction.

My main concerns

I have some reservations regarding AFC. While revenues are up, profits are down. The firm is growing its operations and reinvesting in itself, but profits still aren’t expected for several years. It’s a high-risk bet predicated on whether hydrogen fuel becomes widely adopted.

But progress is being made in this regard. AFC recently inked a £4m contract with ABB, a Swiss electrical business, for a high-power electric car-charging application, while JCB just made a £1 billion order for hydrogen from Australia.

Every day, the number of applications for hydrogen fuel expands, from industrial machines to high-energy production to something as basic as bringing energy to the developing world. In the next years, any of these markets have the potential for tremendous growth. Alkaline fuel cells from AFC have the potential to reduce expenses for anybody who uses them. It offers a significant competitive edge, making it a worthwhile inclusion to my portfolio.

The post Diamond in the rough? This UK company could dominate renewable energy appeared first on The Twelfth Magpie.

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James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I think a shift in investor mentality towards companies working with common Environmental, Social and Governance (ESG) goals will become vital in the next decade. Businesses embracing sustainability and working in areas that promote renewable energy sources are multiplying as we move towards a greener supply chain. And an important concern raised at last year’s COP 26 event is switching to more renewable power sources and phasing out coal power.

I feel UK renewable energy companies can benefit tremendously given recent trends. Here are three shares I’m looking at in this space that could explode in 2022.

EVs take off

If I had to pick one industry that grew enormously in 2021, it has to be electric vehicles (EVs). Car giants are increasing their EV offerings and global markets are opening up infrastructure possibilities that could enable the long-needed switch. And this is where firms like Nexus Infrastructure (LSE: NEX) stand to benefit.

The company’s primary focus is civil engineering and outfitting new homes with utilities. But it also specialises in installing EV charging ports in homes. Last year, the government passed legislation that made EV ports mandatory in all new homes in the country from 2022. This is great news for Nexus because it already works with established builders like Persimmon and Taylor Wimpey. EV ports can be an auxiliary service the company provides, which already gives it a large market share in an emerging space.

It should be noted that a lockdown remains possible given the Omicron spread. And Nexus’s primary business, civil engineering, could be affected given rising construction material shortages and inflation. This could eat into revenue and cause its share price to fall. And Nexus shares already look slightly expensive at 222p, at a forward price-to-earnings ratio of 34 times. But I’m watching this renewable energy stock closely to try and find the optimal entry point for 2022 and beyond.

Future power?

Eqtec (LSE:EQT) is a waste-to-energy company that has patented gasification tech to solve two separate environmental issues. The company uses waste to produce gas fuel to power industries. But this innovative tech is a risky pick that has high potential. And a lot of its future revenue rides on massive adoption.

Its share price has remained dormant for nearly a decade now, falling below 10p in 2015 and never recovering. But a new three-year deal with Toyota Motors and two new power plants could breathe life into this renewable energy stock. The company could build recent developments and work towards wider adoption, which is why it is on my watchlist. However, this remains a speculative pick for my portfolio. 

The next company on my list is ITM Power (LSE:ITM). The hydrogen electrolysis machines the company makes separate hydrogen from water and use clean hydrogen as fuel. This process has zero carbon by-products, which is vital. Hydrogen as a fuel source is still in its infancy, in terms of adoption. This makes me optimistic about ITM’s future potential.

Despite impressive tech, the energy firm was plagued by a massive debt pile in 2021, which led to a poor showing last year. The loss-making company expects a 31% increase in projected revenue which could plug the £250m debt hole. And right now, the company is at a crucial point in the market and could take off in 2022, which is why it is on my watchlist.

The post Renewable energy boom: my top 3 shares for 2022 appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Renewable energy is the future of our economy and early investors have the opportunity to opt in now. It’s a risky endeavour, but I think the UK’s own AFC Energy (LSE: AFC) has what it takes.

Renewable energy challenges

Renewable energy is well-known but has been a relatively under-utilised technology. There are several challenges that need to be overcome if we are to reach a sustainable net-zero target.

The two biggest are intermittency and energy loss over distance. Wind and solar energy sources are abundant and clean but intermittent. We can’t rely on them to generate all the electricity we need around the clock. Electricity also loses energy the further it has to travel, which is why we can’t power homes in London with solar panels in the Sahara.

What I think we need is a fuel source which is energy-dense, transportable, and produced by renewable means. I believe that that fuel is hydrogen and that AFC has a part to play it its adoption.

ACF Energy

AFC Energy is a Surry-based company that manufactures the fuel cells needed to make hydrogen fuel function.

What AFC has to its advantage is a patent on a new ‘alkaline fuel cell’, which is able to use lower purity hydrogen fuel. Producing hydrogen fuel is currently expensive and difficult, especially at the levels of purity required to run a fuel cell. AFC also manufactures modular hydrogen generators able to power buildings as well as vehicles.

Share price

2021 has been an interesting year for the company. It increased revenues over previous years, expanded its orders, and developed new products. The share price sits today at 49.30p, which isn’t unreasonable considering the size of the company and is up about 166% from this time last year.

But, overall, the share value has declined 40% since the start of 2021, which initially confused me. AFC is debt-free at this time and revenues are projected to grow a further 100% next year. On top of that the share price shot up 350% in November of 2020!

I eventually learned that, at the end of October 2020, AFC announced it had delivered its alkaline technology to its research partners, leading me to believe that investors grew overexcited at the news. 2021 was just a correction year.

Doubts

I do have some concerns about AFC. Revenues may be up but earnings are falling. The company is expanding its operations and reinvesting in itself, but it isn’t projected to turn a profit for another few years. It is a high-risk investment based on whether hydrogen is adopted en-masse.

Or not.

We have seen some movement in this direction. JCB recently placed a £1bn order for hydrogen from Australia, and AFC has just signed a £4m order with ABB, a Swiss electrical company, for a high-power electric vehicle charging application.

The use cases for hydrogen fuel increase every day, from industrial machinery and high energy manufacturing to something as simple as electrifying the developing world. Any one of these markets has the potential to grow exponentially over the coming years. AFC’s alkaline fuel cells have the potential to bring down costs for anyone using them. It has a serious advantage over the competition, which makes it worth adding to my portfolio.

The post Renewable energy: can the AFC Energy share price rise again in 2022? appeared first on The Twelfth Magpie.

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James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Renewable energy is the future. There’s no two ways around it. While electric cars may be making all the headlines, there is another technology that I think is far more viable. Prime Minister Boris Johnson has announced his hopes that the UK would become the ‘Qatar of hydrogen’.

But what is hydrogen? How is it different and what are its benefits?

Hydrogen fuel

Hydrogen is the simplest atom in existence and it is very, very abundant. However, it is also highly reactive, meaning it usually combines with other elements to form compounds. This is how we get water (hydrogen and oxygen). That reactivity gives it great energy potential, if it can be separated from whatever it’s bound to.

Hydrogen has an advantage over the lithium-ion batteries used to power electric cars. It is far more energy dense, so it can power heavy machinery or industrial manufacturing.

People can also transport it easily without the hydrogen losing energy in the process, unlike electricity sent over long-distance cables.

Renewable energy conversion

Right now, ITM Power (LSE: ITM) is my top pick in this field. The company builds the modular hydrogen electrolysis machines which separate hydrogen from water. The machines are attached to existing renewable infrastructure, producing green hydrogen.

Green hydrogen is any hydrogen produced by a method which does not release carbon dioxide, standing in stark contrast to blue or grey hydrogen, which are both made by reforming methane gas and release CO2 as a by-product.

ITM has a lot of debt right now but has recently raised £250m to fund construction of two new factories and is poised to meet growing demand.

My main worry with ITM is that it has struggled to turn a profit for several years and still isn’t forecast to do so for at least another three. However, I believe that this is because demand for hydrogen has historically been low — fact which is currently changing.

Higher efficiency

Another hydrogen-based company on my radar is AFC Energy (LSE: AFC). This company manufactures the fuel cells needed to turn hydrogen fuel into electricity. What makes AFC special is their patented alkaline fuel cells which are able to run on lower purity hydrogen with the same efficiency.

On the financial side, unfortunately, AFC suffers from many of the same setbacks as ITM power. High debt, low revenue, and it has yet to turn a profit.

But AFC is growing. It increased revenues in 2021 and expects further growth through 2022. On top of that any company that uses its alkaline fuel cells will be able to use cheaper, lower grade hydrogen, giving AFC a competitive advantage.

Conclusion

Hydrogen power still remains untested at a commercial scale and I consider it a riskier investment compared to more established fuel companies.

But the market has a clear desire for hydrogen.

JCB just signed a multibillion-pound deal with Fortescue Future Industries (a subsidiary of Fortescue Metals Group) to import green hydrogen all the way from Australia. 

What I’m betting on is that other firms around the world need access to a low carbon fuel. I fully expect ITM and AFC to have some growing pains, but to ultimately come out on top. This is why I’m adding them both to my portfolio.

The post Renewable energy stocks: here are my top 2 UK hydrogen fuel companies appeared first on The Twelfth Magpie.

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James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

With climate change being one of the most severe issues facing the world today, finding alternative sources of energy has become extremely important. This means that I’m very interested in several renewable energy stocks, which should see significant demand for the foreseeable future. NextEnergy Solar Fund (LSE: NESF) is my personal favourite.

Recent trading update

A few weeks ago, NESF released a trading update up to the end of September. Here it announced that its net asset value (NAV) per share had increased to 103.1p. This is a rise of nearly 8% since March 2021. As the share price currently sits at 100p, this means that the fund trades at less than its NAV. This is fairly rare for renewable energy stocks, potentially indicating that NESF is too cheap.

The group also added an extra five operating solar assets, taking the total to 99. This means that the total installed capacity has reached 895MW, a rise of nearly 10% since March. Hopefully, this will allow the fund to increase profits.

The future also looks fairly positive. Indeed, the Chairman of NESF, Kevin Lyon, has pointed to factors such as “unprecedented high power prices in the UK, global gas shortages, and the recent UN climate change conference” to show that the switch to solar energy is required. As a result, I view NESF as a long-term stock.

The dividend

The dividend is also a major positive for the group and this year it has been raised by 1.5% to 7.16p per share. This means that it currently yields over 7%, far higher than the majority of other UK stocks. It’s also higher than other large dividend renewable energy stocks, such as Greencoat UK Wind, which yields around 5%.

But I do have some concerns about the dividend. Indeed, the current cash dividend cover is just 1, compared to 1.2 in the same period last year. This means that if profits fall, the dividend is very susceptible to being cut. It also means that there’s no money left for reinvestment into the company. 

Why have I bought this renewable energy stock?

As mentioned before, I feel that company profits will be able to increase, especially because of the increasing necessity for solar power. Therefore, I hope that the dividend will stay at its current level, and there may even be scope for it to rise.

Recently, it also diversified into the energy storage sector through a £100m joint venture with the battery specialist Eelpower. This adds a new source of profits for the company, another factor that will hopefully support the large dividend.

As such, I bought shares in NESF as a solid income stock, which is also slightly undervalued, especially in comparison to its NAV. I may buy more shares at its current price.

The post A renewable energy stock to buy in 2022 appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Stuart Blair owns shares in NextEnergy Solar Fund. 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.