Some investors and market participants, in general, might have a perception that the alternative energy business is not profitable and only exists because of government subsidies. This is one of the main reasons why some market participants do stay away from those types of investments.
However, if we analyze the financial performance of several alternative energy firms, we can see that indeed there are profitable companies in this industry. In fact, according to Bloomberg, there were some wind energy companies, which continued with their production even during the COVID-19 pandemic.
In this article, we will discuss 3 companies, which not only achieved a significant degree of profitability but also shared some of those earnings with its shareholders through consistent dividend payments:
- Northland Power Incorporated (TSE: NPI)
- NextEra Energy Incorporated (NYSE: NEE)
- TerraForm Power Incorporated (NASDAQ: TERP)
Let us now discuss each of those companies in greater detail.
Northland Power Incorporated (TSE: NPI)
Northland Power is a Canadian company which was founded back in 1987. The firm is an independent alternative energy producer. According to the 2019 annual report, during the year the electricity production has reached 9,060 GWh. This was considerably higher than back in 2018 when the total production level stood at 8,254 GWh.
During 2019, the firm’s annual revenue stood at $1,659 million, compared to $1,556 million a year prior. During this period, the firm’s profitability figures also improved, rising from $406 million in 2018 to $452 million in 2019.
One of the advantages of this stock is the fact that the company pays a regular monthly dividend to its shareholders. This is rather rare even among some of the top blue-chip dividend-paying companies, which usually make quarterly or semi-annual payments to its owners. The firm has risen its total annual dividend from $1.09 per share back in 2017, to $1.20 from 2018. This means that Northland Power shareholders will receive payments worth $0.10 per share in every single month.
It is also to the company’s credit that despite the economic challenges brought by the outbreak of COVID-19 pandemic, the management still maintained its dividends unchanged. This is especially important in times when many other companies have cut their payouts to shareholders considerably, or even went as far as to cancel them entirely until further notice.
As we can see from the chart above, the stock has risen steadily over recent months. A year ago, the shares were trading close to $26 level and after making some consistent gains have reached the $33 mark at the beginning of March 2020. However, this was the time when the stock market crash took place, as a result of which the stock dropped all the way down to $21 level.
However, it turned out to be a temporary setback. During the subsequent months, the stock recovered from those recent losses and eventually reached new highs, currently trading at $34 mark.
So as we can see the shares performed quite well after the outbreak of the COVID-19 pandemic. However, as stocks deteriorate again possibly later this year, Northland Power shares might also suffer some notable losses.
The Earnings per Share (EPS) indicator of the stock currently stands at $1.91. This suggests that the Price to Earnings (P/E) ratio of the stock is near 17.8. This means that despite all of those recent gains, the security is still quite fairly valued. Therefore, for those investors looking for some decent dividend-paying stock, it is not yet too late to get into the action.
NextEra Energy Incorporated (NYSE: NEE)
By the end of 2019, NextEra Energy had annual operating revenue of $19,204 million with the net income standing at $3,388 million. The stock of the company had an impressive performance in the past. As the annual report of the firm suggests, from 2014 until 2019, the stock delivered the total shareholder return of 161.46%. This was considerably higher compared to the S&P 500 average, which was at 173.86%.
However, besides the long term track record of capital appreciation, the stock also paid some dividends over the years. Back in 2005, the company’s quarterly payouts to its shareholders have amounted to 35.5 cents per share. During the subsequent years, the firm has steadily increased the rate of those payments.
It is important to note that despite the enormous challenges of the recent economic downturn, instead of cutting dividends, the company raised its quarterly payouts from $1.25 back in 2019, to $1.40 in 2020. This represents a 12% increase over the years, which is very impressive, especially during the economically challenging times.
At the beginning of July 2020, the price of the stock stands near $240 level. Its EPS is $7.34. Consequently, the P/E ratio is near 32.7 level, which might suggest that the stock might be somewhat overvalued. On the other hand, the stock has a dividend yield of 2.3%, which can be quite attractive for income investors in times of near-zero interest rates.
TerraForm Power Incorporated (NASDAQ: TERP)
According to the official 2019 annual report of the company, TerraForm Power owns and operates not only wind energy plants but also solar assets in North America, as well as in Western Europe. In 2019 the company had annual operating revenue of $941 million, with an operating income near $113 million.
The management has raised the quarterly dividend back in 2019, hiking it from 19 cents per share back in 2018 to 20 cents per share. One of the attractive this about this stock is the fact that it has a very attractive dividend yield. With the current market price near $18.50 level and total annual payout at $0.80, this indicator stands at 4.3%. Considering very low interest rates on savings accounts and Certificates of Deposit (CDs), this seems a very lucrative option for income traders.
The only problem with this stock is the fact that the company currently operates at a loss and it will definitely take some effort for the management to restore its profitability. However, for some investors, this might represent an undervalued opportunity.