Some of the best income shares on the market are oil stocks. However, these companies have a range of risks hanging over them, which could hit profits in the future. That is why I have been looking for the best renewable energy income shares to buy today for my portfolio.
Some green energy stocks offer yields of up to 6%, proving that investors do not have to limit themselves when looking for income plays.
With that in mind, here are my three top renewable energy income stocks to buy.
Renewable energy income
The first company on my list is Greencoat UK Wind (LSE: UKW). This is one of the UK’s oldest and most established green energy stocks. It owns a portfolio of wind generation assets across the country.
Its portfolio has grown steadily over the past couple of years through a combination of acquisitions and organic growth. The group recently raised £450m to fund new purchases, and it seems as if investors are more than happy to provide the new capital.
At the time of writing, the stock supports a dividend yield of 5.2%. It also provides a level of inflation protection as contracts in the energy sector tend to be inflation-linked.
These are the reasons I would buy the stock for my portfolio today. Challenges it could face going forward include higher interest rates and more competition for green energy assets. These headwinds could reduce returns on the wind portfolio and dividend growth.
Utilities and infrastructure
The Ecofin Global Utilities and Infrastructure Trust (LSE: EGL) currently supports a dividend yield of 4.2%. The investment trust also trades at a discount to its net asset value of 5%.
This company owns a portfolio of utility and infrastructure businesses around the world. The top two holdings, which make up around 10% of assets under management, are NextEra Energy and Iberdrola.
Iberdrola is rapidly becoming Europe’s largest renewable energy company, and NextEra is the world’s largest generator of renewable energy from the wind and sun.
Considering these holdings, I think the company is one of the best renewable energy income shares to buy for my portfolio today.
However, the risk of using this approach is that I will have to pay the fund’s management fee of 1.5%. This could significantly impact returns in the long run if the company underperforms the broader market.
The final company I would buy is the Gore Street Energy Storage Fund (LSE: GSF).
This business is building a portfolio of energy storage assets across the UK. The goal of these is to help balance supply and demand across the electricity grid as the world transitions towards green energy. Renewable energy generation can be unpredictable, so there is a need to balance supply during periods of low wind, for example.
Gore Street is one of the players chasing this market. The company can use its existing presence in the market to raise funding from investors. This is helping to support the expansion of its operations. With more growth ahead and a dividend yield of 6%, I think this is one of the best renewable energy shares to buy now.
Challenges the company may face going forward include competition and higher interest rates. Both of these could become headwinds to growth.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.