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These Chinese Solar Stocks Can Beat U.S. Solar Stocks

March 10, 2012 | About:
Fueled by the green movement in 2008, Chinese alternative energy stocks are once again showing noticeable gains. In large part, the initial increase in dividends of these stocks back in 2007 and 2008 were due to a surge in the demand for energy efficient products in the Chinese and US markets. Businesses and residences looking to "go green" and become more cost efficient boosted the demand for alternative energy solutions. Although the initial spike in these stocks has subsided, there exists substantial optimism that these potential high yielders will once again reach a level similar to that reached in 2007 and 2008.

All of these stocks reached their 5 year high within one year of each other. JA Solar (JASO) reached its maximum yield in April of 2008 when its shares skyrocketed to approximately $25. LDK Solar (LDK) was one of the highest yielding Chinese solar stocks when it reached its five year high of approximately $70 back in October of 2007. Suntech Power (STP) enjoyed part of the success experienced by LDK when it saw its shares reach levels of $80 in October of 2007 as well. Meanwhile, Hanwha Solarone (HSOL) and Renesolar (SOL) also saw 5 years highs in 2008.

What has occurred ever since the 2007-2008 height of Chinese Solar has been far from epic. Currently all of these stocks are a mere fraction of the strength that they were in their flourishing 2008 period. Currently, only LDK holds a share price above $5 while several of the other stocks teeter dangerously close to the $1 per share mark.

However, despite this sudden and severe dip, there is an abundance of optimism to be had that these once solar giants will again return to similar form. In the proceeding paragraphs I will explain why the 2012 economic developments in both China and the United States will transform these stocks back into their high dividend yielding selves.

The solar industry, although leveling out from its initial surge, is still in a period of growth. This growth is largely attributed to the American and Chinese governments' constructing significant incentives for their consumers to seek alternative energy solutions. This incentive is largely fueled by the current dependence of these countries on outside fuel sources and is an effort for China and the US to reduce their strain on their national power grids.

China in recent news initiated several measures that will cause the production of solar cells and solar components to rise significantly. As a result of these policies it is anticipated that China will surpass the United States as being the third largest photovoltaic market in the world.

Another added boost to the Chinese solar industry will be the further implementation of China's 12th Five year plan that was enacted in October, 2010. This innovative plan has taken into account China's heavy reliance on fossil fuels and their lax industry standards which have long polluted their country. This effort has culminated in the Chinese implementation of a plan that requires them to increase their maximum solar output to reach 10 Gigawatts by 2015 and 50 Gigawatts by 2020.

Further, the 5 year plan has created significant incentives for Chinese industries to rely more heavily on alternative energy sources. This plan has also demanded that extensive restrictions be placed on Chinese industries to force them to change their production practices. As a result of these amended policies, it is reasonable to conclude that the juggernaut that is the Chinese production industry, will soon be seeking further assistance from solar power companies. This business relationship will result in increased solar production that will be conducted in order to meet the government's growing demands.

It is apparent that China is now trying to mimic many of the legislative acts of the United States in an effort to continue to compete with United States markets. This change in policy is also an attempt by China to further their appeal to American consumers based on their commitment to greener and more self efficient industrial practices.

If the 2007-2008 energy policy change in the United States is any indication of where the Chinese solar market can go, then it is safe to assume that these markets are poised to prosper in 2012 and beyond.

Beyond the heavy Chinese influence there also rises a significant interest in solar holdings due to the transition we are seeing in the automobile industry. Although not heavily prevalent at this time, the introduction of an electric vehicle has begun to gain in momentum. With the ever increasing availability of these vehicles and the continued influence of OPEC on high crude oil prices it is reasonable to conclude that the demand for in home solar power systems will continue to rise as the purchase of electric vehicles becomes more common.

According to Forbes magazine, the United States is beginning to lose its foothold on the electric vehicle market. Many cite that the gridlock which is being fought in the House of Representatives is causing many startup companies, which have focused on electric cars, to close their doors. If this troubling trend continues, the market for electric cars is wide open for one of the many other modernized nations to seize.

With the abundance of good news surrounding the Chinese Solar industry, Chinese solar stocks have begun to show positive results.

By analyzing the identified stocks six month projections, it is apparent that all of these stocks have begun to make significant gains. Each stock has shown a resiliency in the market rebounding from 6 month lows to make double digit gains. LDK is leading the newly invigorated Chinese solar charge by showing approximately 100% growth from October, 2011 to present. All other identified solar stocks also show growth which ranges from approximately 10% to 50%.

These trends shows an indication contrary to many United States solar companies, as a significant amount of these low to medium cap stocks, such as Evergreen Solar (ESLR), have fallen off of the market and into Chapter 11 bankruptcy.

The survival of Chinese solar companies shows that they have the ability to wade out significant decreases in production. As the current circumstances indicate, Chinese solar will be able to once again ride the wave of public policy to continued increases in their dividend pay outs.

About the author:

Dividend King
I am primarily an investor interested in creating passive income streams through dividends. I focus on finding and analyzing dividend paying stocks, MLPs and REITs that are a good fit for income investors.

I practice Judaism and my faith is very important to me. I visit family in Israel once a year, but I am educated and work in the United States where I hold an MBA and a bachelor’s in English. I am a patient man, enjoy wine but am not a connoisseur, and I listen more than I speak.

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