7 Factors to Consider When Choosing Clean Energy Stocks

Your portfolio’s main objective is to earn money, but you don’t have to sacrifice your ethics in the pursuit of profits. You can put social responsibility at the heart of your investment activities, and in addition to being ethical, this approach can also be extremely lucrative. 

Clean energy is a great place to start. This guide will point you in the right direction by looking at the benefits of clean energy stocks and explaining the factors you should consider when choosing clean energy investments.

Clean Energy Stocks, Explained

Clean energy stocks are stocks in companies focused on water, wind, or solar energy. These energy production methods are considered to be “clean” or “green” because they aren’t associated with the environmental harm created by fossil fuels such as coal or oil. 

Wind, water, and solar energy are also renewable resources, meaning they cannot run out. These energy sources are more sustainable for the planet, and they are also more sustainable for consumers. 

Why Invest in Clean Energy Stocks

Clean energy stocks can include stocks in companies dealing with wind turbine farms, solar batteries, hydrogen fuel cells, electric vehicles, and similar areas. Investors are interested in these stocks for many reasons, but here are some of the main advantages of investing in clean energy.

1. Clean Energy Is Growing

Clean energy is not used as widely as fossil fuels right now, but these energy sources are growing in popularity. Wind and solar have been the fastest-growing types of energy for the last 20 years, and that trend is showing no signs of slowing down.

2. Clean Energy Is the Future of Energy

Fossil fuels are becoming outdated. Consumers and businesses are shifting their behaviors and attitudes. Half of the world’s energy is expected to come from wind and solar by 2050. Investing in clean energy stocks positions your portfolio to profit from this change.

3. Innovation Is the Heart of Clean Energy

Innovation drives the clean energy industry. It also tends to improve companies and lower costs, regardless of the industry. This leads to more profits for the people who hold stocks in these companies. 

The political climate also has the potential to benefit clean energy stocks. President Biden’s administration is expected to make laws that benefit the clean energy industry. Even traditional energy companies have noticed the potential of clean energy. That’s why Shell has invested over $3 billion in clean energy since 2016. 

solar panel getting sunlight

Tips for Choosing Clean Energy Stocks

The benefits of investing in clean energy are clear, but how do you choose the right stocks? You need to consider several different elements if you want the stock to be profitable, and although you’re focusing on a specific industry, you still need to diversify your portfolio as much as possible.

1. Choose the Type of Clean Energy Investment

You can handpick a clean energy stock from a specific company or invest in multiple stocks at the same time through an exchange-traded fund (ETF). An ETF gives you exposure to several assets (similar to a mutual fund) but trades like a stock. 

2. Decide If You Like Certain Themes

You can choose a clean energy theme to guide your investment strategy rather than narrowing in on specific companies. You may want to focus on companies centered around mobility, such as e-bike manufacturers or lithium battery developers, for example. Choosing a theme is a great way to capitalize on trends in the industry while minimizing your risk through multiple diverse investments. 

3. Examine the Company’s Growth Trends

Investing in a clean energy stock effectively means that you’re becoming a part-owner of that business, and its losses and successes become yours. Look at how the company’s growth has been trending before buying its stocks. 

A stock that is rapidly increasing in value right now does not promise to continue increasing in value. It may grow quickly for a while and then experience a drop. Look for patterns of growth. Even small regular growth can be a positive sign. 

4. Look for a Competitive Edge

The clean energy industry is growing and poised for more growth, but that doesn’t mean every clean energy stock is a winner. You should look for a competitive edge when evaluating different stock options. How does the company stand out compared to its competitors? 

What is the company doing to be successful? How is it harnessing innovation? You want to invest in companies that have the potential to outperform peers in their industry.

5. Compare Debt-to-Equity Ratios

Look at the balance sheets of clean energy companies while doing your due diligence and use their debt-to-equity ratios to compare them. You can calculate debt-to-equity ratios by dividing the business’s total liabilities by shareholder equity. 

6. Find the Price-Earnings Ratio

The price-earnings ratio can help you determine if a clean energy stock is over- or undervalued. Sometimes stocks are overvalued due to heightened investor interest. They may be undervalued because they’re failing to get enough attention. 

Divide the share price by the company’s earnings per share to find its price-earnings ratio and use the ratio to compare different stocks. Ratios like this are a useful way to ensure you’re comparing apples with apples, even if the companies are different sizes or focused on different aspects of the clean energy industry. 

7. Look for Dividend Increases

Look at how the company is distributing its dividends. A consistent increase in dividend payments usually indicates stability, but you also have to consider other factors related to the company’s operations. 

High dividends are not always a positive sign — companies that are paying too much in dividends may not be investing in themselves. They may be desperate. A cut in dividends, similarly, can be a sign the business is in decline or a smart change to get through rough times. 

A financial advisor can help you choose the right clean energy stocks to add to your portfolio. They work with stocks every day and can help you do adequate due diligence before making your next investment. 

Contact Bogart Wealth to Talk About Clean Energy Stocks

Contact Bogart Wealth today to talk about adding clean energy stocks to your portfolio or to touch base about your other financial planning needs. We offer independent investment management, financial planning services, tax planning, and more, and we look forward to helping you preserve your legacy.

Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bogart Wealth, LLC [“Bogart Wealth”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bogart Wealth. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Bogart Wealth is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bogart Wealth’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.bogartwealth.com
Please Note: Bogart Wealth does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bogart Wealth’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 
Please Remember: If you are a Bogart Wealth client, please contact Bogart Wealth, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.
Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

latest posts

Stay up to date with our most recent news and updates!

IT Support by SADOSSecure, Fast Hosting for WordPress

Work with a financial advisor who puts your needs first.

Want to talk first? Call us at
(866) 237-0121

  • This field is for validation purposes and should be left unchanged.

You are now leaving the Bogart Wealth, LLC / Bogart Wealth™ (“Bogart”), website and entering a third party website that we do not control.

Bogart is not responsible for third party websites hyper linked our website, and does not guarantee or necessarily endorse any content, recommendations, products or services offered on third party sites.

In addition, third party websites may have different privacy and security policies than Bogart. Therefore, you should review the applicable privacy and security policies of any third party website before you provide any information.