The renewable energy industry witnessed remarkable growth over the past year, driven by rapid technology advancements, decreasing costs of renewable energy resources, and increased adoption of electric vehicles (EVs). Moreover, growing concerns over climate change and support for environmental, social, and governance (ESG) policies are expected to accelerate the industry’s growth in the coming years.
Furthermore, favorable government policies are expected to fuel the industry’s growth. Recently, the U.S. Department of Energy (DOE) launched the Interconnection Innovation e-Xchange (i2X), a new partnership funded by President Biden’s Bipartisan Infrastructure Law to connect more clean energy to the grid. According to a report by Precedence Research, global renewable energy is projected to reach $2 trillion by 2030, growing at a CAGR of 8.6%.
First Trust Global Wind Energy ETF (FAN)
FAN is a global renewable energy ETF that tracks an index of companies involved in the wind energy industry, weighted according to float-adjusted market cap with strict limits on individual holdings. It saves approximately 60% of its weighting for ‘pure-plays’ in the wind industry and allocates the remaining 40% to ‘diversified sector’ companies involved in the industry. The index is reconstituted and rebalanced semi-annually.
FAN tracks the ISE Clean Edge Global Wind Energy Index. It has an expense ratio of 0.62%, at par with the category average. It has a total of 54 holdings. The fund’s major holdings include China Longyuan Power Group Corporation Ltd Class H (916) with 7.76% weighting, followed by Northland Power Inc. (NPI) and Orsted (ORSTED) with 7.39% and 6.97% weighting, respectively. FAN has assets under management (AUM) of a total of $284.80 million. It has a beta of 0.82.
The fund pays an $0.34 annual dividend, which yields 0.76% at the prevailing share price. FAN has declined marginally over the past month to close the last trading session at $17.00. It has a NAV of $17.01 as of June 16, 2022.
FAN’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Global X Renewable Energy Producers ETF (RNRG)
RNRG offers exposure to companies that produce energy from renewable sources, including wind, hydroelectric, solar, geothermal, and biofuels, including YieldCos, a holding company for renewable energy projects. Its portfolio is market-cap-weighted, with a cap of 6% on individual holdings. The firms included in the fund use a traditional C-Corp structure with no inherent tax benefits.
RNRG tracks the Indxx Renewable Energy Producers Index. It has an expense ratio of 0.65% compared to the 0.62% category average. It has $101.40 million in assets under management. It has a total of 44 holdings. The fund’s major holdings include EDP Renovaveis SA (EDPR) with 6.73% weighting, Centrais Eletricas Brasileiras SA-Eletrobras (ELET3) with 6.33% weighting, VERBUND AG Class A (VER) with 6.22% and Brookfield Renewable Partners LP (BEP.UT) with 5.73% weighting. It has a beta of 0.69.
RNRG has decreased marginally over the past month and 10.4% over the past three months to close the last trading session at $13.75. Its NAV was $13.85 as of June 16, 2022.
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FAN shares were trading at $17.09 per share on Friday afternoon, up $0.09 (+0.53%). Year-to-date, FAN has declined -15.42%, versus a -22.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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