One of the most exciting industries for the next decade is renewable energy, as several countries have announced plans to reduce carbon emissions by approximately 50% by 2030. Further, in a research report by DownToEarth, global energy investment is estimated to increase at an annual rate of 10% to $1.9 trillion in 2021.  

The shift towards clean energy solutions is set to accelerate all over the world making companies such as Brookfield Renewable Partners (BEP) and Renewable Energy Group (REGI) interesting investments. Today I’ll analyze which of these two stocks is the better buy right now.

Brookfield Renewable Partners

Shares of Brookfield Renewable Partners have gained close to 500% in the last 10 years, creating significant wealth for long-term investors. It owns a portfolio of renewable power generating facilities in North America, Brazil, Columbia, Europe, India, and China. Brookfield generates electricity through hydro, wind, solar, pumped storage, distributed generation, and biomass sources.

In the first quarter of 2021, Brookfield’s sales fell to $1.02 billion, compared to $1.05 billion in the year-ago period. However, its adjusted funds from operations soared 11.5% year over year to $242 million. The company ended Q1 with a portfolio of 6,000 generation facilities and roughly 21,000 megawatts of capacity.

In Q1, Brookfield Renewable derived 70% of its power from hydro assets in North America, Columbia, and Brazil. Alternatively, around 33% of its installed capacity is now geared towards solar and wind, diversifying its revenue base in the process.

The renewable energy giant aims to utilize 30% of its FFO (funds from operations) for its business and capital expenditure and distribute the rest via dividends. It expects to grow dividends at an annual rate of 5% and 9% through 2025. The stock provides investors with a tasty yield of 3.14% which is supported by predictable cash flows, fixed power purchase agreements, and long-term contracts.

Renewable Energy Group

Renewable Energy Group provides lower-carbon transportation fuels in the U.S. and internationally. It utilizes a production, distribution, and logistics system to convert natural fats, oils, and greases into advanced biofuels. REGI stock went public in January 2012 and has since returned a solid 537% in more than nine years.

Despite its robust returns, Renewable Energy Group stock is down 43% from record highs providing investors an opportunity to buy the dip. In the first quarter of 2021, its net sales grew 14.1% to $539.7 million while net income fell 47% to $38.6 million year over year. Analysts expected the company to post sales of $539 million and earnings of $0.16 in Q1.

Renewable Energy Group explained that rising costs associated with the biofuel industry are negatively impacting profit margins and expect these trends to continue.

Analysts tracking the stock expect its sales to rise by 24.8% year over year to $2.67 billion while sales earnings growth is forecast at 53.3% in 2021.

The verdict

Brookfield Renewable Partner is an impressive company that has stable cash flows, a leadership position in this space, and solid balance sheet. However, my opinion is that Renewable Energy Group is the better buy right now.  That’s because of REGI’s recent sell-off (the stock is trading down 11% YTD), which makes it an interesting bet for contrarian and value investors. In addition, Wall Street analysts’ average price target for REGI is $81.60, which is 30% higher than where the stock is currently trading.

BEP shares were trading at $38.93 per share on Monday morning, up $1.55 (+4.15%). Year-to-date, BEP has declined -9.78%, versus a 14.79% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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