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The cleantech trend – I’d buy Greencoat UK Wind

Tom Chen
·3-min read
Windmills for electric power production.
Windmills for electric power production.

At present, the UK is already a world leader in producing clean renewable energy. Furthermore, the British government has a target to become 100% green within the next three decades. Just in late 2020, Boris Johnson announced a 10-point green plan with 250,000 new jobs that aims to make a green industrial revolution. Then, the PM also announced the government’s plan to power all UK homes with renewable energy by 2030.

But the cleantech trend is not only local. The election of President Joe Biden in the US is likely to spark renewed private-sector interest in the cleantech sector. I think it is widely anticipated that the global demand for clean energy will rise in 2021 and beyond. And, in my view, Greencoat UK Wind (LSE: UKW) is one of the best long-term cleantech stocks in the UK market to buy right now.

What is Greencoat UK Wind?

Greencoat UK Wind is an investment company specializing in long-term acquisitions of operating wind farms in the UK and globally. It has offices in London and Dublin and manages approximately £5.5bn in renewable energy assets for its clients. As of early 2021, Greencoat is invested in 35 wind farms.

With a nearly £2.5bn market cap, the FTSE 250 constituent is one of the leading funds solely focused on clean technology. Finally, Greencoat also pays an attractive annual dividend of 5.2%, which makes it, in my view, one of the most interesting dividend stocks in the UK market along with these two high-yield dividend stocks.

Greencoat UK Wind share price performance

Greencoat UK Wind’s share price has traded in a very narrow range since the company went public in 2013. As it is among the less volatile stocks in the market, I think it could be a good addition to my portfolio, especially with the high dividend payout ratio it offers.

Looking at more fundamentals, the company has a price-t0-earnings ratio of above 40. This is well above the average of FTSE 250 companies. I think its P/E ratio indicates the high expectations investors currently have for Greencoat and the green tech industry.

At the same time, the Greencoat share price is currently trading at a premium of around 14% of its net asset value (NAV). And, although it is a good sign in terms of the company’s future outlook, there’s a risk here that Greencoat is a bit overvalued right now.

What’s next?

The UK has a clear target to reach zero emissions by 2050. This is good news for Greencoat. It will require the British government to build and subsidize new renewable power plants in the upcoming years. And, I firmly believe the Biden presidency could be a turning point in the US government policy towards cleantech energy. But what I really like about Greencoat is its plans to expand to the US and its constant acquisitions of new renewable energy plants. Just a few days ago Greencoat announced its first investment in the US – the acquisition of a 24% stake in an 861m portfolio of four onshore wind farms located in coastal South Texas.

Looking forward, I don’t see a strong reason in the near future for Greencoat’s share price to fall drastically.

The post The cleantech trend – I’d buy Greencoat UK Wind appeared first on The Motley Fool UK.

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Tom Chen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Motley Fool UK 2021