Renewables: 3 UK stocks offering 5%+ yields. I’ve bought them all!
UK stocks in general are well represented within my portfolio. But the FTSE also offers me an opportunity to invest in a wealth of green energy stocks.
Today I’m looking at three of these renewable energy stocks, all offering dividend yields above 5%. I’ve recently added all three them to my portfolios — ISA and Fund & Share Account.
So, let’s take a closer look at these stocks, and explore why I’ve bought them.
Greencoat UK Wind
Greencoat UK Wind (LSE:UKW) is a closed-ended investment company that focuses, as the name suggests, on UK wind farms. These farms generate clean electricity, which is sold to energy suppliers to power people’s homes.
The trust has 46 wind farm investments across England, Scotland, Wales and Northern Ireland. With an aggregate net capacity of 1,289.8 megawatts, Greencoat produces enough energy to power 1.5m homes.
It’s currently offering a dividend yield around 5%, and the trust aims to increase the dividend in line with inflation. “We are also pleased to announce our 10th successive RPI increase in dividend per share to 8.76p, reflecting December’s RPI of 13.4%,” the firm said in a recent announcement.
After 10 successive RPI increases, I’d say this is a fairly dependable stock.
NextEnergy Solar (LSE:NESF) is a solar-focused trust based in London. The portfolio is comprised of 99 solar assets — the majority of which are in the UK.
Despite what some people may think, Britain isn’t a bad location for solar installations. Modern solar panels work well even on cloudy days — although strong sun is better. And rain can even help generate power by washing away dust and dirt.
The dividend yield currently stands at an attractive 6.5%. Moreover, the forecasts are for payouts of 7.52p and 8.36p in 2023 and 2024, up from 7.17p this year.
The Renewables Infrastructure Group
The Renewables Infrastructure Group (LSE:TRIG) is a UK-based trust investing in renewable energy assets across Europe. Currently, the FTSE 250-listed stock offers me a 5.2% dividend yield.
It’s has a diverse portfolio, and this helps in reducing the risk from over-concentration in individual assets, technology types, weather systems, power markets and regulatory frameworks. It’s assets are positioned across Europe, including UK, Ireland, France, Germany, Spain and Sweden.
I also find TRIG’s valuation attractive — it trades with a price-to-earnings ratio of six.
I’m bullish on all three of these stocks, which is why I’ve added them to my portfolio. However, there are risks that surround any investment. The risks here, in some respects, are shared.
Firstly, it’s worth noting that both Greencoat and TRIG are heavily focused on wind energy. And, as we all know, wind can be temperamental. Until battery technology develops, wind power generation is unlikely to be aligned with energy demand.
Moreover, there are concerns about the Electricity Generator Levy — a tax on the extraordinary returns of electricity generators. It’s still not perfectly clear how the industry will respond to this cap on profits.
Finally, there are concerns that the UK is falling behind the US and EU in that there are not enough green investment incentives. Personally, I’m hopeful here. PM Rishi Sunak is something of a pragmatist. As inflation subsides, I’m hoping to see more support for the industry unveiled and an end to the moratorium around onshore wind.
The post Renewables: 3 UK stocks offering 5%+ yields. I’ve bought them all! appeared first on The Motley Fool UK.
James Fox has positions in Greencoat Uk Wind Plc, The Renewables Energy Group and NextEnergy Solar Fund. The Motley Fool UK has recommended Greencoat Uk Wind Plc. 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 2023