Considering the growing intensity of climate change, governments worldwide have been implementing strict policy measures to transition to a green-energy-based sustainable future. The green energy industry is also expected to grow in the near term because the cost of producing and storing solar and wind energy has declined considerably over the past few years.
According to The International Energy Agency (IEA), the renewable energy capacity is set to expand 50% between 2019 – 2024. Furthermore, according to a Facts & Factors report, the global renewable energy market is expected to grow at an 8.3% CAGR between 2021 – 2026.
While it could be challenging to select the best stock in the green energy industry because many highflying stocks don’t possess fundamental strength, we think investors looking to capitalize on the industry’s growth in a less risky way could bet on quality green energy ETFs — First Trust Global Wind Energy ETF (FAN) and Global X Renewable Energy Producers ETF (RNRG).
First Trust Global Wind Energy ETF (FAN)
FAN is an exchange-traded fund that was launched and is managed by First Trust Advisors L.P. It invests in global public equity markets and in companies that directly promote environmental responsibility. In addition, the fund seeks to track the performance of the ISE Clean Edge Global Wind Energy Index by using a full replication technique.
With $411.20 million in AUM, FAN’s top holding is China Longyuan Power Group Corp. Ltd. Class H, with an 8.83% weighting in the fund, followed by Vestas Wind Systems A/S (VWDRY) at 8.47% and Northland Power Inc. (NPIFF) at 7.46%. Its 0.62% expense ratio equals the category average.
FAN pays a $0.23 annual dividend, which yields 1.03% at the prevailing share price. The ETF’s average four-year dividend yield stands at 2.39%. FAN has gained 26.7% over the past year and nearly 5.6% over the past nine months.
FAN’s POWR Ratings are consistent with its growth outlook. It has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Trade.
Global X Renewable Energy Producers ETF (RNRG)
Launched and managed by Global X Management Company LLC, RNRG invests in companies that operate across utilities, hydroelectric power generation, solar energy, wind alternative energy resources, biofuels, and renewable electricity sectors.
VERBUND AG Class A (OEZVY) has a 6.75% weighting in the fund as its top holding, followed by EDP Renovaveis SA at 6.39% and Orsted at 6.09%. RNRG has $145.10 million in AUM. Its 0.65% expense ratio compares to the 0.62% category average.
RNRG pays $0.45 annually in dividends, which yields 2.73%. Its average four-year dividend yield stands at 3.80%. Over the past year, the fund has gained 11.8%. It has gained 6.4% over the past six months.
It’s no surprise that RNRG has an overall B rating, which equates to Buy in our proprietary rating system. In addition, it has an A grade for Trade and Peer.
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FAN shares were trading at $21.80 per share on Friday afternoon, down $0.19 (-0.86%). Year-to-date, FAN has declined -5.71%, versus a 20.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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