Three top stock picks in the beaten-down renewable power sector. Plus, a 'full capitulation' in stock markets – The Globe and Mail

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U.S. Congress has failed to pass climate friendly legislation and, according to Morgan Stanley strategist Stephen Byrd, this has left renewable power stocks beaten down and ripe for investment.

Last Friday, Democratic West Virginia senator Joe Manchin announced he would not support climate-related tax incentives and this caused a sell-off in the sector. Morgan Stanley now believes there are “multiple attractive buying opportunities” among clean technology stocks.

Notably, Mr. Byrd expects that the U.S. power sector will achieve its climate goals – 75 per cent decarbonization between 2005 and 2030 – ahead of schedule. This process of reaching these goals implies substantial expansion of renewable power and a considerable growth runway for renewable power stocks.

There are four broad reasons why the analyst believes clean energy stocks are attractive in the current environment.

One, renewable energy costs have become steadily more attractive relative to the rising costs of natural gas and coal.

Two, despite the recent inaction by Congress, existing tax incentives are set to be extended.

Three, Mr. Byrd projects continued 20 per cent annual growth in rooftop solar power and roughly 40 per cent annual growth in large-scale solar power installations.

The fourth reason is that lack of investment, combined with a higher incidence of severe weather, has left existing power grids unreliable and inefficient.

Among Morgan Stanley’s top picks in the sector are solar providers Sunrun Inc. (RUN-Q), a leader in rooftop solar power, and The AES Corp. (AES-N) which specializes in large scale solar. The third top pick is the one I own, clean hydrogen producer Plug Power Inc. (PKUG-Q).

Mr. Byrd believes that for clean hydrogen, “the hype starts to become reality in 2022.″ Plug Power is set to bring three large facilities online this summer and Morgan Stanley expects continued orders for the company’s clean power solution, particularly from Europe where natural gas supplies are obviously threatened.

The S&P/TSX Composite Energy Index is down 18 per cent from its early June peak and some investors may be looking more towards a less carbon-dominated future for power generation. At the very least, renewable power stocks can help diversify domestic portfolios.

— Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Northland Power Inc. (NPI-T) This international power producer has a reasonable valuation and a reliable (albeit not growing) dividend. Analysts are quite bullish: there are 13 buy recommendations, with a forecast total return of over 16 per cent. Jennifer Dowty looks at the investment case.

The Rundown

What The Contra Guys are up to with their portfolios this summer

Ben Gallander and Ben Stadelmann agree on tons of stuff, but where we are at in the economic and business cycle today leaves them with different viewpoints. Here’s a mid-summer update on their thoughts on markets and portfolio opportunities.

Will soaring oil and gas prices be the unmaking of high prices?

Oil and gas prices continue to be stubbornly high, panicking both politicians and consumers. At the other end of the spectrum, the Bank of Canada seems to be more optimistic, projecting that globally oil prices will gradually decrease. In other words, central bankers are alluding that oil price behaviour is typical of commodity prices in every business cycle. But if they are wrong, and oil prices continue to be elevated for years to come, will we be at the threshold of a major economic disaster? Value investing professor Dr. George Athanassakos explains why he thinks things are worse than what central bankers believe.

Funds in ‘full capitulation’ as they slash stock allocation: BofA poll

Investors’ expectations of global economic growth and corporate profits have tumbled to the lowest on record, Bank of America’s monthly survey of global fund managers for July found, describing the picture as “full capitulation”

Others (for subscribers)

Analysts’ forecast returns and recommendations for all stocks in the S&P/TSX Composite Index

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Globe Advisor

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Ask Globe Investor

Question: I’m interested in investing in strong, reliable dividend-paying companies. How do I find out the history of a company’s dividend payments?

Answer: You can do one of two things: Get the information directly from the company’s website, or use a third-party site such as Globeinvestor.com.

Let’s take BCE Inc. BCE-T as an example, starting with how to find the company’s own data.

First, do an internet search for “BCE investor relations.” When you land on the investor relations page, click on “shares and dividends.” Then scroll down to see a table of BCE’s most recent and upcoming dividend payments.

Want even more information? By clicking on “view the dividend history page,” you’ll pull up a list of BCE’s dividends going back nearly 40 years.

Not all companies are as thorough as BCE when it comes to presenting historical dividend data. But most understand how important dividends are to their shareholders and publish at least a few years’ worth of information. (Note to companies that don’t publish any historical dividend data at all: Please save your shareholders the aggravation and make this information easily accessible on your website.)

If you’ve tried a company’s website and struck out, you can find historical dividend information on most third-party financial websites. Globeinvestor.com, for example, recently upgraded this feature and now includes more than a decade’s worth of dividend data.

Returning to the BCE example, enter the stock symbol (BCE) in the search box on Globeinvestor.com to view the company’s stock quote. Then, under the share price, click on “dividends” to reveal all of BCE’s quarterly dividends since 2005, including declaration, ex-dividend, record and pay dates. Globeinvestor.com also provides the annualized five-year dividend growth rate, which in BCE’s case is about 5.1 per cent.

Whether you are using Globeinvestor.com or another financial website, I strongly recommend that you double-check all dividend data against the company’s own numbers to make sure they are correct.

–John Heinzl

What’s up in the days ahead

Ian McGugan will explain why investors may be underestimating how high interest rates will go.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff

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