Dividend shares provide me with a regular source of income, but there is no guarantee. This passive income is the holy grail for many investors, but choosing the right stock is often the hard part.
Today, I’m looking at two stocks that give me access to the green energy market. Given Europe’s apparent dependence on Russia for gas, energy independence and sustainability are becoming increasingly important in ways that we are all experiencing.
I don’t own any of these stocks, but given the current challenges surrounding energy security, I think it’s wise for me to look more closely.
bp (LSE:BP) is an oil and gas giant, but it is also at the forefront of the energy transition. By 2025, nearly half of the group’s $15bn capital expenditure budget will be devoted to green energy sources. By 2030, this green branch of business could generate as much as $9bn-$10bn in underlying cash profits.
The group is investing in low-carbon energy to expand into solar and offshore wind, and developing new opportunities in carbon capture and hydrogen. BP is also commissioning 100,000 electric vehicle charging points and opening more than 1,000 new strategic facility sites. And in the past three years, the company’s renewables pipeline has tripled.
However, oil and gas will continue to be a major part of its portfolio. And it’s certainly able to deliver on shareholders this year as energy prices continue to skyrocket. BP earned $8.2bn (£7.1bn) between July and September, more than double its profit from the same period last year. Meanwhile, the dividend yield currently sits at 3.7% — which could be better.
Despite the profitability of the business and the prospects in green energy, I’m just not buying. I see a better entry point into 2023, especially if the global slowdown reduces demand for hydrocarbons.
Greencoat UK Wind
Greencoat UK Wind (LSE: UKW) is a closed-ended investment company. Its purpose is to provide investors with an annual dividend that rises in line with retail price index inflation while preserving the capital value of its investment portfolio. The dividend yield currently stands at an attractive 4.9%.
The firm has 44 wind farm investments in England, Scotland, Wales and Northern Ireland with a total net capacity of 1,289.8 megawatts (MW).
The trust has facilities that provide enough energy to power over 1.5 million homes. These are not all mega-farms either. This is a recent investment in Windy Rig, Scotland, which consists of 12 turbines and is 100% owned by the Trust. Greencoat had a market share of about 5% in UK wind farm operations.
The company’s potential for its shareholders is partly dependent on wind conditions — over which it has no control — and the general attractiveness of wind power. However, trends suggest that UK Wind is a profitable investment.
The stock price has been pretty volatile since late summer – when Liz Truss became prime minister. I am going to buy this stock very soon at less than 150p and with a discount of 4.57% on its net asset value.
Post 2 Dividend Shares for the Green Energy Revolution! The Motley Fool first appeared in the UK.
James Fox has no position in any of the shares mentioned. The Motley Fool UK recommends Greencoat UK Wind. The views expressed on the companies mentioned in this article are those of the author and may therefore differ from official recommendations made by us in our membership services such as Share Advisory, Hidden Winners and Pro. Here at The Motley Fool, we believe that contemplating different types of insights makes us better investors.
Motley Fool UK 2022