I’ve been looking for renewable energy stocks to buy for my portfolio. Luckily, when it comes to green energy, UK investors are almost spoilt for choice.
The London Stock Exchange is becoming one of the world’s premier centres for green finance. As cash has flooded in, a range of new companies and funds have set themselves up to capitalise on the trend.
Basket of renewable energy stocks
To build the most exposure to renewable energy stocks, I’d buy at least one investment trust focused on these companies for my portfolio. My top pick, and the trust I’d buy today, is the Jupiter Green Investment Trust.
The great thing about buying an investment trust is I don’t have to worry about picking stocks. I also don’t have to worry about the complications that can arise due to investing overseas. Around 32% of Jupiter’s portfolio is invested in US-listed companies, with a further 9% in Japanese stocks. The rest of the portfolio is well diversified around the world.
The wind turbine producer Vestas Wind Systems is the largest holding. Despite the growing number of renewable energy stocks listed in London, there’s not yet a company listed with the size and technological experience of Vestas.
Despite the trust’s benefits, it has some drawbacks as well. The ongoing annual management charge of 1.6% is relatively high. Moreover, investors have to rely on the trust’s managers to pick investments. There’s no guarantee they’ll pick the right ones and achieve positive returns.
Nevertheless, despite these risks, I’d buy the trust today for its exposure to global renewable energy stocks.
As well as investment trusts, there are a couple of other options available to UK investors regarding buying international renewable energy stocks. China Yangtze Power is the largest producer of hydroelectric energy in the world. Based in China, the company was listed in London last September via the London-Shanghai stock connect scheme.
I think this is one of the best renewable energy investments available on the London market today. That’s why I’d buy the company for my portfolio. However, I realise there are significant risks of investing in Chinese firms, including the language barrier. As such, this might not be suitable for all investors.
A firm with a presence closer to home is the Foresight Solar Fund. This business owns a diversified portfolio of ground-based solar PV assets in the UK and Australia. I’d add this company to my portfolio of renewable energy stocks, primarily because it’s an income champion. The stock currently offers a dividend yield of 6.3%. Income generated from solar assets supports the payout.
The company’s assets have helped support its dividend in the past, but there’s no guarantee this will continue. A drop in solar power rates could send profits plunging, compromising the group’s dividend.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Foresight Solar Fund Limited. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.