Not so long ago, a lot of the UK’s renewable energy stocks looked like highly-valued jam-tomorrow punts. But I’m seeing some solid cash generation these days, and some share prices have been gaining. There’s tasty income to be had too.
Looking at Greencoat UK Wind (LSE: UKW), I see the share price is up 15% over the past 12 months.
Even after that, we’re still looking at a forecast price-to-earnings (P/E) multiple of only around seven. So that’s a company with growing profits, on an attractively low P/E. Oh, and there’s a forecast dividend yield of 5% for this year too, predicted to rise to 5.5% in two years.
I see some risks for Greencoat. Firstly, high electricity prices are currently boosting profits, and that won’t last forever. So there might be pressure on future dividends. Still, cover by earnings is currently strong, at over 2.5 times in 2021. There’s also £900m in debt on the books, which I don’t like.
But I do think Greencoat’s business model, of holding and operating a large portfolio of wind farms probably offers some of the lowest risk in the sector.
Generation is one part of the renewable energy challenge, and storage is another. That’s where a company like Gore Street Energy Storage Fund (LSE: GSF) comes in. The shares have been erratic in the past couple of months, and are down 2% over the past year.
The mediocre share price performance means Gore Street’s forecast dividend yield stands at 6.2%, which I definitely like. Profits have been erratic. And the company has been raising capital to fund its expansion.
That makes it tricky to assess likely future earnings right now, and to get a feel for whether earnings are likely to cover dividends sustainably. I’m generally wary of companies that expand rapidly too.
Still, Gore Street is in the battery storage business, and it could be argued that grabbing a slice of the market as fast as possible is the way to go.
My final candidate is energy giant SSE (LSE: SSE), which is on a predicted dividend yield of 5.2%. SSE shares are up 9% over the past 12 months through a volatile year.
SSE has the benefit of being a well established energy infrastructure company. It operates across the UK and Ireland, and it invests heavily in low-carbon energy.
Its established base means it should be less risky than smaller firms just making inroads into the business. Buy saying that, dividends have been thinly covered by earnings in recent years — only around 1.1 times in the 2021-22 year.
So a couple of years of recession and pressure on electricity demand might leave things a bit stretched. Earnings haven’t been growing too strongly, with 2022 earnings coming in slightly below pre-pandemic 2018.
Which to buy?
I think all of these have their own potentials, and their own risks. But I’d probably buy all three, except for that one perpetual drawback — too many cheap shares out there, and not enough cash. Probably, I’ll invest in a renewable energy stock before too long though, and these are my top three candidates.
The post Are these 3 high-dividend renewable energy stocks no-brainer buys now? appeared first on The Motley Fool UK.
Markets around the world are reeling from the current situation in Ukraine… and with so many great companies trading at what look to be ‘discount-bin“ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
- 2 FTSE 100 dividend stocks! Which should I buy for 2023?
- FTSE 100 recovery: 2 cheap shares I’d buy on their way up
- 2 dividend shares for the green energy revolution!
- 1 no-brainer dividend stock to buy for long-term passive income
- If I’d invested £1,000 in SSE shares at the start of 2022, here’s how much I’d have now
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.