The risks of climate change have stoked long-term interest in renewable energy, including solar power and wind energy. Renewable energy is one important path to mitigating climate change. It’s abundant, derived from natural resources, and can be replaced faster than it is consumed. It generates lower greenhouse gas emissions. That makes companies that create or use significant amounts of renewable energy an attractive place to begin hunting for investments while supporting the global transition to net zero emissions.
While renewable energy stocks can be fast-growing and volatile, you can also find opportunities to receive above-average dividends. We located five stocks included in the Morningstar North America Renewable Energy Index that provide attractive dividend yields and range from fairly valued to significantly undervalued. They are Avangrid AGR, Eversource Energy ES, Evergy EVRG, OGE Energy OGE, and Gilead Sciences GILD.
Dividend and Fair Value
At a glance, dividend yield is the ratio of the dividends paid by a company relative to its stock price. The price/fair value ratio indicates if the stock’s price is higher than the Morningstar estimate of its fair value. A ratio above 1.00 is considered overvalued, and a ratio below 1.00 is undervalued.