Are you after a list of hydrogen stocks that pay dividends? Look no further. This article details the best hydrogen stocks to buy that also have healthy dividend yields. This may give you the best of both worlds, in terms of income as well as a potentially high total return.
Hydrogen has emerged as an important alternate energy source. As the world transitions from thermal coal burning, many look to alternatives like natural gas. The issue with natural gas, however, is that this is still natural gas. As such, it is an intermediary step toward meeting the world’s energy needs, not a long-term solution. Although it burns much cleaner than coal, it still releases enough pollutants into the atmosphere for it to be problematic.
If we are to achieve true carbon neutrality, then cleaner sources such as hydrogen must be investigated more deeply. Here are the best hydrogen stocks that pay dividends, in my opinion, to help you take advantage of the world’s energy shift.
Fortescue Metals Group (FSUGY)
Fortescue Metal Group (OTCMKTS:FSUGY) is one of those top hydrogen stocks that pay dividends and should be on your watchlist. Traditionally an iron ore producer, the group is transforming its business to produce green hydrogen and aims to fully decarbonize operations by 2030.
A big bonus of investing in this company is that its dividend yield is very high, around 9% at the time of writing. Dividends are incredibly important to an investor’s total returns. Although they have been incorrectly dismissed by the Dividend Irrelevance Theory, more and more people are looking to hydrogen companies like FSUGY stock to diversify their portfolios.
Management realizes, in the age of ESG investing and the world’s rising urgency to reduce emissions, the world will need iron ore as much as it needs cleaner energy sources. This means that one can potentially reap the rewards of investing in both materials through an energy stock like FSUGY and benefit from its high income in turn.
Air Products & Chemicals (APD)
Air Products & Chemicals (NYSE:APD) is one of the world leaders in supplying industrial gases and a global leader in liquefied natural gas (LNG) processing technology. It’s also one of the world’s largest suppliers of merchant hydrogen. Air Products’ extensive hydrogen infrastructure and ongoing projects, such as the $7 billion carbon-free hydrogen joint venture in Saudi Arabia, position it as a leading global hydrogen energy company.
APD stock’s dividend yield is a healthy 2.4% in addition to being well-covered by its free cash flow. Part of what makes APD stock a good pick from a income point of view is that its gross, operating, and net profit margins are all positive. This is a big difference to some of the most speculative hydrogen-based businesses today. Wall Street also predicts it may have strong total return potential, as its target price is $330 at the time of writing.
The company’s forward P/E of 22.85 times earnings is lower than its current P/E of 29.72, indicating the market is bullish on its prospects for the immediate future.
BP (BP)
BP (NYSE:BP) is a global oil and gas producer with ambitions to transition to lower-carbon energy. Hydrogen is a crucial aspect of its strategy, and BP intends to capture a significant share of the hydrogen market in its core operating areas. It’s one of those key hydrogen stocks that pay dividends you should watch closely.
BP’s move into hydrogen production, including plans for the U.K.’s largest blue hydrogen production plant, represents a significant shift from its traditional oil and gas business.
One of the great things about energy stocks is that they’re known for paying out juicy dividends. BP is no exception. Its yield is an impressive 4.8%. With a payout ratio of just 26%, it’s very well-covered by the company’s cash flow strength.
The brand is also making strides in research and development. BP Ventures has invested in start-up Advanced Ionics to reduce zero-carbon hydrogen production costs. Utilizing heat from existing operations, Advanced Ionics’ technology aims to lower electricity consumption and bring the cost of green hydrogen to less than $1 per kilogram, aligning with BP’s goal to produce up to 0.7 million tonnes of green hydrogen by 2030. This is another reason you should keep this one on your watchlist.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.