Go for the Green With These Renewables and Infrastructure Plays

While negotiations are still ongoing, the long-term prospects have improved for an eventual deal on infrastructure, potentially leading to massive spending programs focused on climate change, renewables and other green energy projects. Several MoneyShow.com contributors highlight their favorite long-term investments to participate in these trends. Jimmy Mengel, The Crow's Nest If you're looking for a long-term buy-and-hold play on renewable infrastructure, look no further than Hannon Armstrong Sustainable Infrastructure Capital . The sustainability real estate investment trust (REIT) has three positive catalysts creating a tailwind for the company. First, Washington is shifting its focus to sustainable infrastructure. Second, real estate has proven the most profitable investment in recent history, and REITs provide everyday investors the opportunity to get in alongside those who have enough capital to purchase property. And third, Hannon sports an attractive 2.48% dividend yield. It's grown its dividend for the last two years, increasing by an average of 1% each year. As a bonus, management is experienced and focused on making money. CEO Jeffrey Eckel explains that as a 40-year-old company, Hannon is the first U.S. public company to invest solely in climate change solutions. Hannon's mammoth pipeline contributes to this growth, as it's disrupting the decades-old energy, transportation, and agriculture sectors. These areas of the economy are rife for disruption and can provide ample investment opportunities for those forward-looking enough to get on board. Hannon generates income through its $2.9 billion real estate portfolio that includes investments in projects spanning three markets -- what it calls behind-the-meter, grid-connected, and sustainable infrastructure. And the revenue potential here is unmatched in the industry. Its behind-the-meter investments focus on creating energy-efficient facilities, including universities, government and corporate offices, restaurants, and even entire communities. It reduces carbon emissions by investing in small-scale, onsite power generation like roof-to solar panels and improving heating and lighting systems. The energy savings here are used to pay the company, boosting its cash flow. Its grid-connected offerings include solar, wind, and energy-storage projects that sell power to utilities and corporations through the power grid. Its smallest source of income is its sustainable infrastructure, where the company invests in ecological restoration, conservation, and stormwater remediation. But Hannon expects this sector to rapidly expand as communities face more environmental challenges from climate change. Although it's not a household name, Hannon is financing the future of energy. And that's something we want to get behind. We're buying Hannon Armstrong Sustainable Infrastructure Capital as a long-term play on clean energy infrastructure financing. Roger Conrad, Conrad's Utility Investor Of all the industries that would benefit from the proposed boost in federal infrastructure spending, renewable energy developers and producers arguably need a jump-start least. Every large electric and natural gas utility, for example, has already pledged to be carbon neutral at least by 2050. And U.S. utilities are already well on their way toward installing the needed wind, solar and energy storage capacity to get there. America's leading wind and solar developer NextEra Energy , for example, added 1.84 gigawatts of new projects during the second quarter, bringing its total backlog to 15 GW. The company is also more than 40% of the way toward its goal of installing 30 million solar panels by 2030 at its south Florida utility unit. And Dominion Energy has $72 billion in renewable energy rate base opportunities through 2035, including grid upgrades, solar development and offshore wind. All of the electric utilities in our model portfolios have become major investors in renewable energy. Dominion and Duke Energy have the most compelling opportunity for rate base spending, meaning their main challenge is keeping regulators happy and executing project construction. Buy up to $85 and $100, respectively. AES Corp. , Algonquin Power & Utilities , Avangrid and NextEra present a hybrid opportunity combining big projected regulated rate base spending with extensive and rapidly expanding unregulated contract generation. And Atlantica Sustainable , Brookfield Renewable Partners , Clearway Energy and Enel SpA (ENLAY) are contract renewable energy generators with extensive project pipelines. They'll fuel at least mid-to-upper single-digit dividend growth to mid-decade, regardless of how much Uncle Sam spends. All but Atlantica and NextEra currently trade below my recommended entry points and rate as buys now. Genia Turanova, Unlimited Income Schlumberger is the undisputed international leader in products and services for oil & gas producers. It the biggest in the business and its high-tech services are indispensable for all stages of production. However, we can't ignore long-term trends. Green energies, from solar to wind, are here to stay -- creating an existential threat to the oil & gas industry. Based on the history of past sector busts, Schlumberger no longer wants to be exposed to the extremes of the oil cycle. And the company has a plan. Schlumberger sees a future beyond oil and gas, and wants to be a significant player in the energy transition. In the near to medium term, it's focused on three main green initiatives: Help reduce emissions by identifying, measuring, and eliminating the largest-impact elements. Provide technologies to reduce -- and even eliminate -- the need for flaring, or burning unneeded emissions. Electrify the oil and gas industry -- and power production more sustainably. Longer-term, Schlumberger is quietly working on a variety of sustainability projects. Early in 2020, the company started its New Energy business venture with a focus on energy efficiency and storage and breakthrough technologies in green energy. It's a fast-growing market: $50 to $75 billion will be spent annually by the end of this decade. With a range of projects and partnerships in areas ranging from carbon capture... to geothermal energy... to hydrogen... to lithium, Schlumberger is making sure it will remain relevant for decades to come. One thing is for sure: If energy prices remain strong, SLB's business will do great. It's the go-to oil service company for the entire industry, be it in the U.S. or internationally. And the company's New Energy portfolio will ensure its growth continues even as demand for fossil fuel declines. Elizabeth Vermillion, CFRA Research's The Outlook Jacobs Engineering carries our highest investment recommendation of 5-STARS, or Strong Buy. The company provides a broad range of technical, professional, and construction services to numerous industrial, commercial, and government clients worldwide. In 2020, Jacbos launched its Climate Action Plan. Jacobs is committed to 100% renewable energy and being net carbon zero by the end of 2020. The company is also targeting net carbon negative status by 2030. Jacobs is working with clients to help them achieve net zero power generation and distribution by 2030. The firm offers a suite of ESG project work and solutions, including aiding clients with energy storage solutions, consumption, and reduction efforts, and how clients use energy, water, transportation, etc. The company currently generates almost $5 billion in ESG-related revenue. Within the CMS segment, we see numerous market trends positively impacting the business. Space exploration and intelligence trends support demand for IT enhancements, security, and other digital enterprises from Jacobs. We see accelerating project awards for its software engineering to support digital modernization. Finally, clean energy project work drives demand or the firm's industry-leading program management to help customers transition away from fossil fuels. We expect federal infrastructure spending to be a positive growth catalyst. Federal funding for digital modernization and decarbonization of infrastructure will increase demand and market share for the company, as we think Jacobs will be selected to participate in much of the project work. We see these as growth drivers for years to come, starting as soon as funding for project work is assigned. Ben Reynolds, Sure Dividend TransAlta Renewables (Toronto: RNW) has a history in renewable power generation that goes back more than 100 years. In 2013, the company was spun off from TransAlta , which remains a major shareholder in the alternative power generation company. TransAlta Renewables owns 13 hydro facilities, 23 wind farms, 7 natural gas plants, 1 battery asset and 1 solar asset. In total, the company owns directly or through economic interests, an aggregate of over 2,500 megawatts of gross generating capacity in operation. TransAlta earns a place on the list of top monthly dividend stocks, not just because of its high yield, but also because of its future growth potential. TransAlta stands on the forefront of a major growth theme - renewable energy. Organic growth is a future catalyst, as well as acquisitions. For example, i‪n the first quarter, the company completed previously announced acquisitions of a 303 megawatt asset portfolio from its parent company, TransAlta Corporation, which includes 274 MW of wind capacity. TransAlta pays a monthly dividend of $0.0783 per share in Canadian dollars. In terms of U.S. dollars, the annualized dividend payout of $0.75 per share represents a strong yield of ~4.2%. TransAlta is therefore an appealing mix of dividend yield and future growth potential. The dividend appears secure, as the company has a strong financial position. Jack Bowers, Fidelity Monitor & Insight Flooding in Europe and China; mudslides in India; and here in the U.S., a historic drought accompanied by record heat and wildfires -- each is stoking the global debate about climate change and what can be done about it. Enter several new Fidelity funds whose investment objectives are more expansive and ambitious than the boilerplate maxim of long-term growth of capital. Notably, their investment strategies include the subjective and more altruistic goal of improving earth's health. In offering Fidelity Climate Action (FCAEX), Fidelity Water Sustainability (FLOWX), Fidelity Environmental Bond (FFEBX) and others, naysayers might argue that Fidelity's marketing people are targeting a new generation of investors. And they are! Regardless of their motives (we assume larger profits), socially conscious funds broaden the typical total return investment objective to include something that really can't be quantified by us in our ratings. Nevertheless, Fidelity Water Sustainability has been upgraded to OK to Buy this month largely because of its 63% stake in various industrials. While the economic recovery should benefit cyclicals, companies engaged in the treatment, distribution and conservation of water may be especially well-positioned over the long term. Surging 7.3% in July, the narrow subsector got a shot in the arm when Congress moved closer to passing a $1 trillion infrastructure improvement bill. The bill contains $55 billion to replace lead water lines and $50 billion more to guard again climate-induced droughts and floods. With expenses presently capped at a high-ish 1%, Water Sustainability holds the promise of doing well while also doing good.

Go for the Green With These Renewables and Infrastructure Plays

Investment experts highlight their favorite ways to take advantage of infrastructure spending, with a particular focus on green projects, renewables and climate change.

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