Income Investments

Investors did not like Hannon Armstrong's (NYSE:HASI) fourth quarter earnings announcement last night.  While core earnings were a little weaker than expected, that is not what has the stock trading down 11% today.  What shocked investors is the fact that the company did not raise the dividend this year for the first time since the REIT went public, and it gave 3 year guidance which likely disappointed many investors. Last month, I wrote, I expect that Hannon Armstrong will continue to be a well run and conservative business in 2018, and that management will raise the dividend at the lower end...

by Tom Konrad Ph.D., CFA Last week, a Bloomberg reported on a rumor that Brookfield Asset Management (BAM) was in talks to buy Abengoa's (ABGOY) stake in its former YieldCo Atlantica Yield (ABY).  Atlantica had been looking for a new sponsor for well over a year since parent Abengoa filed for bankruptcy. Purchasing Yieldcos (companies that own clean energy infrastructure and use the cash flows to pay large dividends to shareholders) is not new to Brookfield.  Not only has BAM long sponsored Brookfield Renewable Partners, LP (BEP), a limited partnership that has essentially been a Yieldco since before the term was...

by Tom Konrad, Ph.D., CFA It's been a busy several days in the YieldCo space. On February 5, 8point3 Energy Partners (NASD:CAFD) announced an agreement to be acquired by an infrastructure investment fund managed by Capital Dynamics. While I was still writing an article on why the sale price was at a virtually unheard of discount relative to the stock market price, two more YieldCo deals were announced: NRG Energy (NYSE:NRG) agreed to sell its sponsorship stake in NRG Yield (NYSE:NYLD and NYSE:NYLD/A) to Global Infrastructure Partners, and YieldCo TerraForm Power (NASD:TERP) made an offer to buy out Spanish YieldCo Saeta Yield (Madrid:SAY) at a 20 percent...

Tom Konrad CFA Clean energy yieldcos buck the general trend by paying out a large proportion of cash flow to investors, and rapidly increasing their dividends at the same time.  The key to this trick has been their rapidly appreciating stock prices. High yield companies generally grow slowly, while high growth companies have low dividend yields. Normal companies grow by investing some profits in new business opportunities.  Early stage growth companies typically retain all their earnings to invest in new business.  More mature companies have fewer opportunities, and so share a larger proportion of...

by Tom Konrad Ph.D., CFA When SunPower (SPWR) and First Solar's (FSLR) YieldCo, 8point3 Energy Partners (CAFD), went public two years ago, I used the financial nerd joke in 8point3's ticker symbol as a launching point to explain what "cash available for distribution," or CAFD, means. In that article, I cautioned against the risks of using a short-term cash flow measure for long-term investing decisions. That risk is becoming more and more real for investors in 8point3 because the YieldCo is using  short-term, interest-only financing to fund its long-term investments. All of 8point3's debt matures in 2020, and refinancing that debt will...

by Sean Kidney Renewable Energy Finance via BigStockPhoto There has been a bit of interest recently about rapidly expanding options for retail investors to get involved in renewable energy projects. While we still see retail bonds as making a relatively modest contribution to the transition to a low carbon economy, they are important in engaging the public and creating awareness for green thematic investments which can only be good. Here’s a round up of some of the activity going on in the retail bond market (please note, this...

by Debra Fiakas CFA This week Pattern Energy Group’s (PEGI:  Nasdaq), the independent wind power generator, is scheduled to report sales and earnings for the quarter ending September 2015.  The company has cultivated a strong following among analysts for a company its size.  Nine estimate contributions have gone into a consensus estimate of $87.2 million in sales for the quarter, resulting in a net loss of a penny per share.  If achieved the sales hurdle would represent 22% growth over the same quarter last year.  A penny loss may not seem impressive, but it is substantially better than...

Investors looking for income have long relied on the stocks of electric utilities. Naturally cash generative utility companies have a history of generous dividend payout policies.  However, for those investors who have a concern about sustainability or climate change, even utilities with the highest dividend yields may not be appealing. We looked at a selection of nine utility companies with mixed achievements in terms of the percentage of renewable energy sources found in their retail sales of electricity.  The intensity of renewable energy in utility portfolios varies considerably across the industry.  Many utilities are grappling with legacy coal and oil infrastructure.  Others are not favored...