3 Renewable Energy Stocks Smart Investors Are Eyeing

The renewable energy industry’s prospects look promising, driven by surging demand for clean energy to address climate change concerns, favorable government incentives, and high and volatile fossil fuel prices. Thus, it could be wise to consider quality renewable energy stocks Alliance Resource (ARLP), Steel Partners (SPLP), and Westlake Chemical Partners (WLKP), which are attracting the attention of smart money. Read more….

Soaring demand and attractive, long-term government incentives and funding create solid tailwinds for the renewable energy industry this year and beyond. Rising demand is driven by an increasing need worldwide to transition to renewable energy to address climate change concerns and volatile fossil fuel prices.

Given the industry’s bright prospects, it could be wise to buy fundamentally sound renewable energy stocks Alliance Resource Partners, L.P. (ARLP), Steel Partners Holdings L.P. (SPLP), and Westlake Chemical Partners LP (WLKP), which have been gaining significant institutional investment traction lately.

Renewables, led by solar and electric vehicles (EVs), are expected to boost clean energy investment in 2023. Investments are propelled by various factors, including high and volatile fossil fuel prices, a strong alignment of global climate and energy security goals, and enhanced government support in strengthening the nation’s footholds in the emerging clean energy economy.

The Inflation Reduction Act (IRA) of 2022 allocates approximately $400 billion in federal funding to clean energy. With this legislation aimed at supercharging clean energy nationwide, an analysis from the National Renewable Energy Laboratory shows that the U.S. will get to around 80% clean electricity by 2030.

By 2035, federal analysis predicts that renewable sources will comprise approximately 86% of U.S. power, primarily spurred by the IRA.

Renewable energy investment hits a record-breaking $358 billion during the first six months of 2023, an increase of 22% compared to the start of last year, according to the latest investment data from BloombergNEF’s (BNEF) 2H 2023 Renewable Energy Investment Tracker report. Solar was the main driver of the stellar results in the first half of this year.

Moreover, a total of $239 billion was invested in large- and small-scale systems, accounting for two-thirds of total global renewable investment over the first six months of 2023 and resulting in a staggering 43% rise year-over-year. The U.S. invested $25.50 billion in large and small-scale solar during this year’s first half, marking an impressive 75% increase from the first half of 2022.

For the full year 2023, global renewable capacity additions are expected to grow by 107 gigawatts (GW), the largest absolute increase ever, to more than 440 GW, as per the International Energy Agency (IEA). Furthermore, global renewable capacity additions could reach 550GW in 2024.

According to a report by Mordor Intelligence, the U.S. renewable energy market size is projected to reach 636.44 GW by 2028, exhibiting a CAGR of 10% during the forecast period.

Given the industry’s tailwinds, fundamentally sound renewable energy stocks ARLP, SPLP, and WLKP, which are attracting smart money, could be solid buys now.

Let’s discuss the fundamentals of these stocks in detail:

Alliance Resource Partners, L.P. (ARLP)

ARLP is a diversified natural resource company that produces, markets and supplies energy domestically and internationally primarily to major utilities, metallurgical, and industrial customers. The company operates through Illinois Basin Coal Operations; Appalachia Coal Operations; Oil & Gas Royalties; and Coal Royalties segments.

Institutional shareholders own a 19.6% stake in ARLP. Also, the total value of its holdings amounts to $499 million.

On July 28, ARLP announced that the Board of Directors approved a cash distribution to its unitholders for the quarter that ended June 30, 2023. ARLP unitholders received a quarterly cash distribution of $0.70 per unit on August 14, 2023. This distribution represents an increase of 75% over the cash distribution of $0.40 per unit for the June 30, 2022 quarter.

The increase in cash distribution reflects the company’s strong financial position and is consistent with its long-term strategic capital allocation plans. ARLP’s annual dividend of $2.80 yields 13.98% on the prevailing share price, while its four-year average dividend yield is 13.50%.

ARLP’s trailing-12-month net income margin of 28.03% is 98.3% higher than the industry average of 14.13%. Also, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 46.03%, 24.03%, and 26.42% are significantly higher than the industry averages of 21.34%, 10.40%, and 8.06%, respectively.

ARLP’s revenues increased 3.5% year-over-year to $641.84 million in the second quarter that ended June 30, 2023. Its income from operations grew 3.7% from the year-ago value to $183.93 million. The company’s EBITDA rose 1% year-over-year to…