The world economy has slowly moved over the years to cleaner fuel resources. This transition is likely to take several more decades to complete. What has become clear, however, is that the world is moving towards a future that is driven by renewable energy.
Many companies are taking early steps to participate in the energy transition. Three energy companies that position themselves to win are Royal Dutch shell (NYSE: RDS.A)(NYSE: RDS.B), Xcel Energy (NASDAQ: XEL), en NextEra Energy (NYSE: NO). This is why investors do not want to miss this trio.
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The royal treatment
Reuben Gregg Brewer (Royal Dutch Shell): Royal Dutch Shell cut its dividend in 2020 due to low energy prices. That’s not good. But it would be a mistake to count out this nearly 200-year-old energy giant, given its long history of adapting its business with the world around it.
Today, that means retreating into the carbon-heavy oil space, investing more heavily in transitional ventures (such as liquefied natural gas, which is often accompanied by renewable energy to ensure energy reliability) and increasingly focusing on the future of energy (such as renewable energy). power, which the company calls a “growth” enterprise). The dividend cut, though unfortunate, helps free up cash to fund the transition of its business, and Shell plans to invest as much as $ 20 billion a year to meet the world’s changing energy needs. The key, however, is that only 35% to 40% of the capital expenditure budget is earmarked for oil. The rest is divided between its transition and growth businesses. This is a fairly aggressive plan that will work out especially well if the world makes a definite move towards renewable energy.
To be honest, conservative dividend investors prefer a more mid-range approach, such as this Total take. But if you believe that the renewable power transition will take place quickly, it seems that Shell is in a better position to move into the future of clean energy while milking its cash cow oil business for as long as it can manage.
Invest in the future of energy
Matt DiLallo (Xcel Energy): Nuts Xcel Energy has a daring goal. It aims to deliver 100% carbon-free electricity by 2050. The fuel of the plan is a constant transition to cleaner power sources. The company plans to end all its coal-fired power plans by 2030 and replace capacity with cleaner natural gas and renewable energy. Meanwhile, it is investing in emerging technologies such as green hydrogen to achieve its ambitious multi-decade plan to produce emission-free energy.
In the short term, Xcel Energy expects to invest up to $ 24 billion by 2025 in expansion projects, such as new renewable energy capacity. This is an increase of $ 1.4 billion compared to the initial plan, driven by increasing investment in new solar developments and wind power projects. In addition to visible short-term growth, the company sees significant future expansion potential in solar power due to gradually declining costs and the intriguing potential of using nuclear energy to produce emission-free hydrogen that could eventually become a substitute for natural gas.
The company anticipates its investments over the next four years will grow earnings per share annually by approximately 5% to 7%. This should give him the fuel to increase his dividend by 2.7% at the same annual rate. Xcel’s steadily rising earnings and dividends should provide attractive total returns for investors, especially given the company’s low risk profile. That combination of low risk and attractive reward potential makes Xcel a great way for investors to earn green as the world goes green.
A win-win share for all investors
Neha Chamaria (NextEra Energy): If you want to invest in renewable energy, look no further than NextEra Energy. It is, after all, the world’s largest producer of energy from solar and wind. But here’s the real deal: the company, which also owns the largest regulated utility in the United States, Florida Power & Light Company, is doing everything in its power to ensure that it remains at the top in the years to come, is exactly why investors make a lot of money from this stock.
NextEra had a solid year in 2020, beating COVID-19 pandemic blues and delivering where it matters. As the company’s earnings grew, its forecasts also grew to 2023. NextEra predicts that adjusted earnings per share in 2022 and 2023 would increase by 6% to 8% as the projected 2021 basis, backed by an ever-growing renewable energy portfolio.
In the first nine months of 2020, NextEra added nearly 4,800 megawatts to the renewable energy backlog. With that, the total backlog exceeded 15,000 megawatts by the third quarter, surpassing the company’s existing capacity for renewable energy. In other words, NextEra’s capacity to produce energy from wind and solar will grow exponentially in the near future. Since the company is also busy storing the battery and the potential for green hydrogen, there are many opportunities.
So you have an established utility here that is taking the renewable world by storm, making NextEra Energy an unprepared stock to play the boom in renewable energy. In fact, growth and income investors should be richly rewarded, as NextEra is also an excellent company that pays dividends. Although the 1.7% return in the utilities industry is at the bottom, management is aiming for 10% annual dividend growth to a minimum of 2022. With NextEra’s earnings for the year 2020 just around the corner and the next dividend increase expected be in coming weeks, you do not want to miss this train.