The Best ASX Hydrogen Stocks
to buy now In May 2024

Check out our Industry Experts’ report and
analysis on the Best Hydrogen Stocks right now on the ASX

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The Best ASX Hydrogen Stocks to buy now In May 2024

Check out our Industry Experts’ report and analysis on the Best Hydrogen Stocks right now on the ASX

Get Our Free Newsletter

What Are ASX Hydrogen Stocks?

ASX hydrogen stocks are companies listed on the Australian Securities Exchange (ASX) that engaged in the production, distribution, or utilisation of hydrogen as a clean energy source.

Why Invest In ASX Hydrogen Stocks?

As the world decarbonises, hydrogen is gaining recognition for its potential to generate power and heat with zero emissions, producing only water and electricity as byproducts. And plenty of companies, from big energy providers to small cap penny stocks are trying to capitalise. Although many of them (even giants like Fortescue) are years away from large-scale production, investors believe in the long-term potential and are seeking to get in early.

But it is not just companies driving the change. Governments around the world, including Australia, are investing heavily in new initiatives. Australia has its own National Hydrogen Strategy, first launched in 2018 and has published an annual report since then. The most recent one found that Australia's hydrogen and derivatives industry has an investment pipeline of A$230-300bn, worth 40% of all global projects announced to date.

The Australian Renewable Energy Agency (ARENA) supports several projects, including the development of a green hydrogen plant, that align with Australia’s green hydrogen strategy. This strategy is integral to ensure not only that Australia can realise its ambitions from an environmental standpoint, but from a supply chain one too.

 

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Future Outlook Of The ASX Hydrogen Sector

The long-term outlook looks positive as hydrogen has potential to play a key role in decarbonisation.

According to Norwegian renewable energy advisory company DNV, the world will need 15% of its global energy to be from hydrogen by 2050, if it is to meet targets from the Paris Climate Change Agreement. It could help avoid up to 534PJ of natural gas, 20mt of coal equivalent and 360 kilo-barrels per day of oil. As noted above, Australia is investing a lot of money into hydrogen. 

At the same time, many individual ASX Hydrogen stocks (even those that have committed money to the cause) are at early stages. In other words, don't expect to see them producing hydrogen any time soon. Yet if they can capitalise on the trend, there is a significant opportunity for these companies to make money and have a positive impact on the world in doing so.

The Best ASX Hydrogen Shares To Buy Now


Fortescue Metals (ASX: FMG)

Fortescue Metals (ASX: FMG) is an iron ore producer and exporter but has made forays into hydrogen energy. It has a specific division Fortescue Future Industries (FFI) to look at hydrogen opportunities. And in April 2024, it opened an electrolyser manufacturing facility in Queensland. It will be the first of its kind in Australia to do this on a commercial scale.


Fortescue Metals Group Ltd (ASX: FMG) stands out as an exceptional investment opportunity within the burgeoning green energy sector, especially for those focused on hydrogen energy. Distinguished by its aggressive push into the hydrogen market through its subsidiary, Fortescue Future Industries (FFI), Fortescue is pioneering in producing green hydrogen from 100% renewable power sources.

The company's commitment is evidenced by its significant investments, including US$550 million in the Phoenix Hydrogen Hub and US$150 million in a green hydrogen project in Gladstone, Queensland. These projects aim at producing liquid green hydrogen, highlighting Fortescue's dedication to decarbonizing by 2030 and catering to hard-to-decarbonize industries.

Financially, Fortescue's recent performance has been robust, with a striking interim dividend increase to $1.08 per share for 1H FY24, demonstrating a 44% hike from the previous year and a yield of 4.17%. This outperformance is attributed to the strong iron ore prices, from which Fortescue, as an iron ore pure-play miner, has significantly benefited. With an anticipated total yield of 8.37% for FY24 and strategic investments in its green hydrogen production projects, Fortescue represents a compelling blend of financial strength and visionary leadership in renewable energy.

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Woodside Energy (ASX: WDS)

Woodside Energy (ASX: WDS) makes our list of top ASX hydrogen stocks given the capital warchest it has to invest into new projects, although it has been far from a smooth road. Its proposed plant in Kwinana, WA still hasn't begun construction despite hopes it would happen in 2024 and laws from the Biden administration cast doubt on if it can access Inflation Reduction Act cash for its project in Oklahoma.


Woodside Energy Group Ltd (ASX: WDS) presents an enticing investment opportunity for those eyeing the burgeoning hydrogen market. The company's strategic pivot towards renewable energy, notably hydrogen projects across Australia, New Zealand, and the United States, underscores its commitment to sustainability and future-focused ventures. With ambitious plans for hydrogen and ammonia production facilities leveraging renewable energy sources, Woodside is positioned to capitalize on the growing demand for clean energy solutions.

Financially, despite a challenging year marked by falling energy prices, Woodside delivered a robust operational performance, demonstrating resilience in adverse market conditions. Despite a dividend cut, the company's dividend policy remains attractive, providing a steady income stream for investors. Moreover, its collaboration with Japan's JERA in the Scarborough project not only enhances its market position but also signifies trust and confidence from key industry players.

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Origin Energy (ASX: ORG)

Origin Energy (ASX: ORG) is retail energy provider that is looking to get into hydrogen. Origin has proposed building a Hydrogen Hub in the Hunter Valley. For this, it received $45m from the NSW government in September 2023 and signed a joint development agreement with Orica. First production is targeted from 2026.

Origin Energy (ASX: ORG) emerges as a good investment opportunity, backed by robust financials and a focus on hydrogen technology. With its diversified portfolio, Origin's FY2024 first-half results showcase impressive figures: a total group revenue to $7,996 million, a staggering 149% surge in statutory profit to $995 million and an 88% increase in underlying EBITDA to $1,995 million.

Despite challenges in the integrated natural gas segment, Origin's energy market division flourished, generating $813 million in EBITDA driven by a rebound in wholesale prices. Moreover, the company's recent £280 million investment in Octopus Energy, escalating its stake to 23%, underscores its commitment to innovative ventures. Octopus Energy's rapid expansion, doubling its retail customer base and licensing its Kraken platform to over 52 million accounts globally, placed an excellent roadmap for Origin's growth trajectory.

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The Best ASX Hydrogen Shares To Buy Now

Fortescue Metals Group (ASX: FMG)

Fortescue Metals Group (ASX: FMG) stands out as an exceptional investment opportunity within the burgeoning green energy sector, especially for those focused on hydrogen energy. Distinguished by its aggressive push into the hydrogen market through its subsidiary, Fortescue Future Industries (FFI), Fortescue is pioneering in producing green hydrogen from 100% renewable power sources.

The company's commitment is evidenced by its significant investments, including US$550 million in the Phoenix Hydrogen Hub and US$150 million in a green hydrogen project in Gladstone, Queensland. The latter of these was formally opened in April 2024.

Unlike the small caps in the hydrogen space, Fortescue has a profitable business to hang its hat on, in the form of its Pilbara iron ore mining and exporting business.

Woodside Energy (ASX: WDS)

Woodside Energy Group (ASX:WDS) presents an enticing investment opportunity for those eyeing the burgeoning hydrogen market. 

The company is primarily an oil and gas company, although it has seen the future and it doesn't have a place for oil and gas. Hence, it has tried to make forays into hydrogen, yet it been far from a smooth road.

Its proposed plant in Kwinana, WA still hasn't begun construction despite hopes it would happen in 2024 and laws from the Biden administration cast doubt on if it can access Inflation Reduction Act cash for its project in Oklahoma.

 

Origin Energy (ASX: ORG)

Origin Energy (ASX: ORG) is retail energy provider that is looking to get into hydrogen. Origin has proposed building a Hydrogen Hub in the Hunter Valley. For this, it received $45m from the NSW government in September 2023 and signed a joint development agreement with Orica.

First production is targeted from 2026 and it will produce up to 5,500 tonnes per year, the bulk of which will be used to help decarbonise Orica's ammonia manufacturing facility by replacing the natural gas currently used as feedstock. In the longer term, Origin hopes to make it avaliable to transport customers, particularly those currently using diesel buses and trucks.

How To Choose The Right ASX Hydrogen Shares?

Selecting the right ASX hydrogen stocks requires evaluating companies based on their technological innovation, market position, and alignment with government initiatives. Prospective investors should consider firms with a solid track record in hydrogen projects, robust partnerships, and access to funding.

Companies actively involved in government-backed green hydrogen hubs or those receiving significant grants for research and development are often well-positioned for growth. It's also crucial to assess the company's potential for scalability and its role in the broader hydrogen ecosystem, from production to storage and distribution.

How To Invest In Hydrogen Stocks In Australia?

Investing in hydrogen stocks in Australia can be done directly through purchasing shares of companies listed on the ASX involved in green hydrogen energy. Alternatively, investors looking for diversified exposure to the sector may consider exchange-traded funds (ETFs) that include a range of hydrogen and renewable energy stocks.

Engaging with a financial advisor or using online brokerage platforms are practical steps to initiate investment. Due diligence, including research on individual companies' financial health and growth prospects, is essential to making informed decisions in any asset class, but particularly with stocks, and especially stocks in sectors at such an early-stage as hydrogen is at.

Are ASX Hydrogen Shares A Good Investment?

It is a complicated answer. Although hydrogen has much future potential, it will take a lot of capex and time to realise this potential. The large cap stocks are arguably well-positioned, but even they have had setbacks - particularly Woodside (ASX:WDS). The saving grace with large-caps is that they have existing businesses to fall back on, although they may not be ESG friendly in the way that hydrogen is.

Smaller caps, like GreenHy2 are highly risky and are likely years away from full-scale production, yet may create shareholder values from 'little wins' such as pilot programs with big names to test out hydrogen technologies. Small cap hydrogen stocks are not stocks for the faint-hearted and risk averse investors.

FAQs on Investing in Hydrogen Stocks

ASX hydrogen stocks involve companies on the Australian Securities Exchange that are engaged in the hydrogen energy sector, focusing on clean energy production and technology.

Our Analysis on ASX Hydrogen Stocks

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