Clean energy investing is not on for
growth investors, traders, and speculators. Conservative income
investors can invest in green companies as well, and dividend paying
energy efficiency stocks deserve pride of place in their portfolios.
In my clean energy
investing workshops, I tell attendees that investing in clean
energy stocks does not have to be riskier than investing in any other
sector. The key to investing in clean energy with a low risk
profile is the same as low risk investing in any other sector: find
stable, profitable companies selling at reasonable valuations.
Identifying stable, profitable companies is not always easy. Even
if a company is profitable today, rising competition, the falling price
of alternatives, or changing technology can rapidly undermine business
models and profits. A rapidly changing legal, regulatory, and
cultural landscape further complicates the search. All of
these factors apply in clean energy, but much more in rapidly evolving
technology and incentive driven sectors such as solar PV and cellulosic
ethanol than in more staid sectors such as energy efficiency and
conservation.
The Economics of Energy Efficiency
Energy
efficiency
stocks lack the sex appeal of solar
stocks or smart
grid
stocks, but that very dowdiness makes them much more stable
than most other alternative energy sectors. Further, unlike most
renewable energy, much energy efficiency makes economic sense without
incentives, so the companies are less dependent on the government to
drive sales. If Google
(GOOG) had chosen to make energy efficiency cheaper than coal
("EE<C"), rather than renewable
energy
cheaper than coal (RE<C) they'd have been done before
they started.
Dividends
One reason firms pay dividends is because it's a way to signal to
investors that management is confident about their ability to pay that
level of dividend far into the future. Dividend cuts are
embarrassing to management, and even worse for a company's stock price,
so companies that pay dividends tend to believe that they will be able
to remain profitable and keep on paying that dividend.
Safer Clean Energy Stocks
Given this, dividend paying energy efficiency stocks are a great place
to start when looking for relatively stable clean energy
investments. The list that follows is simply a result of me going
through our
list of energy efficiency stocks and pulling out the ones that pay
a dividend. I plan to look more deeply into many of these
companies in future articles.
| Company (Ticker) | Yield* | notes / articles |
| Aixtron AG (AIXG) | 0.3% | LEDs |
| Cabot Corp (CBT) | 1.8% | green building |
| Eaga PLC (EAGA.L) | 5.0%** | UK residential energy efficiency |
| General Electric (GE) | 2.8% | A little of everything |
| Honeywell (HON) | 2.2% | HVAC, building controls |
| Johnson Controls (JCI) | 1.6% | Building controls |
| Kingspan Group, PLC (KGSPF.PK) | 0.6%** | Green Building |
| Linear Technology Corp. (LLTC) | 2.7% | Efficient power conversion |
| Neo-Neon Holdings (1868.hk) | 1.5%** | LEDs |
| PFB Corporation (PFB.TO) | 5.0% | Green Building / PFB Corporation |
| Philips (PHG) | 2.5% | Lighting |
| Power Integrations (POWI) | 0.5% | Power conversion / Power Integrations |
| Waterfurance Renewable Energy (WFI.TO) | 3.5% | Geothermal Heat Pumps |
*The dividend rates were as of January 28, 2010, and may have changed
due to changes in the stock price or dividend policy since then.
**These London and Hong Kong listed companies follow the European
practice
of declaring a final and interim dividend that varies much more than
the typical US-based dividend, so the dividend may be less of an
indicator of earnings stability.
If you know of any dividend paying efficiency stocks I've missed,
please let me know in a comment.
DISCLOSURE: Long
PFB.TO, WFI.TO
DISCLAIMER: The information and
trades provided here and in the comments are for informational purposes
only and are not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your own
risk levels before you make any investment. Past results are not an
indication of future performance. Please take the time to read the full disclaimer
here.
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