With 2019 drawing to a close, we're about to put another decade in the books. One of the major storylines over the past 10 years has been the advancement of renewable energy, which has gone from a niche market supported by government subsidies to one that's growing briskly without any assistance.
The sector's emergence over the past 10 years hasn't been without its share of growing pains. Overly aggressive expansion caused the industry to have too much capacity at times, while also burdening some companies with more debt than they could handle. Those issues caused several renewable-energy stocks to burn their investors by delivering poor performance.
A small handful of companies, however, have stood out by generating excellent returns for their investors. Here's a look at the five best ones from the past decade.
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Enphase Energy: A 250% return since its IPO
Enphase Energy (ENPH -5.56%), which makes microinverters for solar panels, didn't make its public market debut until March 2012. However, the company has been a big winner as its 250% return since its IPO has outpaced the 165% total return from the S&P 500 during that time frame. However, it's worth noting that the entire gain has come this year, as it's been the best-performing solar stock of 2019. Powering that performance has been the explosive growth in its revenue (up 97% year over year) and earnings (up 495% year over year) thanks to the increased adoption of its microinverters, which help convert the energy generated by the sun into usable power. That fast-past growth should continue in the coming decade because Enphase has worked hard to significantly expand its addressable market.
Brookfield Renewable Partners: A 318% total return this decade
Brookfield Renewable Partners (BEP) continued to generate market-beating total returns for its investors over the last 10 years. Its 318% total return came in comfortably ahead of the S&P 500's 261% total return during the decade. One factor powering those returns has been the hydropower-focused company's ability to continue growing its high-yielding payout. It has increased its distribution to investors by a 6% compound annual rate since 2012, powered in part by its ability to buy cash flowing renewable power generating assets. Not only has the company continued investing in hydropower, but it also added wind and solar to its portfolio over the past decade. Brookfield Renewable, meanwhile, expects even more growth in the coming decade, which could enable it to continue generating high-powered total returns for its investors.
SolarEdge Technologies: A 344% return since its IPO
SolarEdge Technologies (SEDG 1.92%), which makes power optimizers that perform a similar function as Enphase's microinverters, didn't come public until 2015. However, it has been red-hot since then, generating a more than 344% return, which has blown past the S&P 500's 67% total return during that timeframe. Like Enphase, it has also been red hot this year, as its stock has more than doubled in 2019 alone. That fast-paced growth should continue in the coming decade as the company not only continues to supply the solar industry with low-cost power optimizers, but also expands into new markets like energy storage and electric vehicle charging. Because of that, it could continue generating strong returns in the coming years.
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NextEra Energy: A 555% total return this decade
NextEra Energy (NEE 0.54%) has been a big winner over the last decade as its 555% total return has more than doubled that of the S&P 500. While utilities aren't typically known for being big outperformers, NextEra has been able to shine due in large part to its investments in renewable energy. Since it started focusing on investing in the sector in 2005, the company has been able to grow its earnings at an 8.5% compound annual rate, which is by far the fastest pace among the largest power companies. As a result, it has outperformed its peers as well as most stocks in the S&P 500 over the last several years. Meanwhile, with the company ending the decade with one of the largest backlogs of renewable-energy development projects in its history, it has plenty of power to continue growing at an above-average rate in the coming years.
Tesla: A 1,560% return this decade
Tesla (TSLA 12.06%) has been the best renewable-energy-focused stock over the past decade. The electric-vehicle maker has grown from making a niche product for deep-pocketed buyers to producing zero-emission vehicles for the masses. On top of that, it made inroads into the energy storage and solar markets. While it hasn't always been a smooth ride, Tesla's stock has richly rewarded investors who believed in the ability of its controversial yet visionary CEO, Elon Musk, to deliver. Meanwhile, with a growing number of new products in development, the company's stock could continue riding higher in the coming decade.
Renewable energy could be an even bigger winner in the next decade
While the renewable-energy sector as a whole has underperformed over the past decade, it could deliver much better results in the next 10 years. That's because companies and governments need to pour trillions of dollars to transition the global economy away from fossil fuels. While lots of stocks should benefit from those investments, these five companies appear well positioned to continue winning given their proven track record in recent years.
