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Stocks for Green Investors

Sustainable investing hasn't just arrived; it's fast becoming a bedrock principle, says John Waggoner, Kiplinger’s Personal Finance.

Here are some companies that are taking up the sustainability challenge and addressing pressing environmental problems – too much trash, scarce resources and increasingly intractable weather woes.

Tackling Waste

Darling Ingredients (DAR), which began its life as a Texas rendering company in the 19th century, collects food waste and various animal by-products and transforms it all into more useful things for customers in the food, animal feed and fuel industries, among others. In December, President Trump signed into law an extension of the biodiesel tax credit through 2022, and that provided the company with a big slug of capital for future expansion. Meanwhile, trends for the company's other core businesses remain favorable, according to Baird analysts, who believe the stock can trade over the next 12 months at nearly a 30% increase from its recent close.

Waste Management (WM), another Texas company, is a less speculative play on the world's growing mountain of trash. The firm is the largest trash collector (and disposer) in North America. Waste Management has an impressive dividend history, increasing its payout every year for the past 16 years. Furthermore, the company has a strong record of beating Wall Street's earnings estimates, according to Zacks Investment Research.

Delivering Alternative Energy If you want wind power, you need a windmill, and the most important part of a windmill is its propeller. TPI Composites (TPIC) makes propellers for the wind industry that are strong, light and very, very large. TPI has about 13% of the global wind propeller market, says Jonathan Waghorn, co-manager of the Guinness Atkinson Alternative Energy Fund, and that market is growing rapidly. That said, TPI is a small, emerging growth company, and such firms entail considerable risks.

First Solar (FSLR) is one of the brightest lights in the photovoltaic solar energy industry. "It's the ExxonMobil of solar," says fund manager Waghorn, whose fund owns the stock. The stock logged a 2% loss over the past year, a return that masks some big ups and downs along the way. But the company has a huge backlog of new orders, and the shares are reasonably priced, according to Morningstar.

Combating Climate Change

Boosting crop yields with more fertilizer is one way to address farmers' increasing weather woes. Nutrien (NTR), a Canadian firm whose stock trades on the New York Stock Exchange, is the world's largest fertilizer company. Although Nutrien produces crop nutrients, more than half of annual sales come from its retail division, with more than 1,700 locations that sell seeds, fertilizer and other merchandise directly to farmers. The stock is rated "buy" by investment firm CFRA. The shares sport a robust dividend yield.

Keeping the Water Flowing Xylem (XYL) provides equipment and services that address the full water cycle, from collection to distribution and use, to the return of water to the environment. Xylem said in November that demand from industrial end users, such as oil and gas companies and mining firms, had softened, clouding the stock's short-term outlook. But its remaining operations are doing well.

Over the long haul, Xylem should benefit as utilities continue to adopt smart metering, sophisticated data analytics and other cost-saving services and equipment. Investors should note that Xylem is sensitive to U.S.-China relations, and that foreign currency fluctuations can impact profits.

Editor’s Note: John Waggoner is a contributing writer to Kiplinger's Personal Finance magazine, www.Kiplinger.com.

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