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To invest mostly in operating UK wind farms with the aim to provide investors with an annual dividend that increases in line with RPI inflation while preserving the capital value of its investment portfolio.
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A very positive and well informed 'buy' recommendation from The Times:
https://archive.ph/IgyxO
In the UKW Half Year Report for the six months ended 30 June 2023 there is a sentence on page 10 that I don't understand "The Group’s strategy remains to maintain an appropriate balance between fixed and merchant revenue". What is merchant revenue ? I assume fixed revenue refers to fixed price PPA's.
As an aside, I don't understand what a buyout price or a recycle price for a ROC is either, and Mr Google is reluctant to explain.
Many thanks in advance
It does seem f a bit like that. We have had three el Nina years so lets see what happens in a el Niño one.
For a definitive reference point -
Energy Trends: UK weather - GOV.UK (www.gov.uk)
Hi Monkswood. The fact that the dividend would have been covered 3x with "normal" wind is very encouraging. That said, they seem to suffer from bad wind nearly every year, which makes me wonder whether "normal" really means normal. ;-)
A very bullish stance by the managers in the conference call. As usual they provided a good explanation to the details of the business.
They clearly feel that the inflation/discount rate/interest rate has been misunderstood in relation to their business model.
They wanted to get across that they are looking to total forward returns of 10%, around 5% on the divi and the other half from an increase in nav - funded from the £200m income in excess of the divi.
A few points -
The divi cover last half would have been 3x (rather than 2x) if there had been 'normal wind'.
The forward price curve now (£78mwh this year) means the energy windfall tax will now cost £50m over 2 years rather than £200m over three.
The rcf is currently zero but will be drawn down to fund the investment in the London Array (completion is after H1). Their discount rate is already ahead of their peers who they believe will need to increase theirs. Interest rates- even if all floating (which they are not) it would cost £20m per 1% increase in rate, this is equivalent to only 0.1% of divi cover .
Longer term they are looking to around 35% gearing with an all in cost of debt of 5%.
Even with a 18% reduction in output they still managed 2.1 x Divi cover.
What is interesting, and reassuring, is the table with hypothetical divi cover under different energy pricing looking forward over the next 5 years.
'The fixed revenue base means that dividend cover is robust in the face of extreme downside power price sensitivities. A dividend that continues to increase with RPI is covered down to £10/MWh over the next 5 years.'
Https://www.lse.co.uk/rns/UKW/half-year-results-nav-and-dividend-announcement-3pnm9cyqk4ld3g1.html
Monkshood,
See below report on likely / believed cash balance
https://www.google.com/amp/s/www.sharecast.com/amp/news/news-and-announcements/greencoat-uk-wind-leads-25pc-investment-in-london-array-wind-farm--14097748.html
Whilst NI and the North were becalmed earlier in the year there was a fairly strong and constant Eastly blowing across the Southeast, having more assets in this region will help to diversify their geographic spread.
Has anyone crunched the debt/cash flow numbers for an insight into how the first half has been?
SSE results released for Q1 highlight the issue-
'Onshore wind farm output of 715 gigawatt-hours was 29 per cent below planned levels for the quarter and 37 per cent lower than in the same period of last year as a result of the still weather conditions.
SSE’s offshore wind farms generated 496 gigawatt-hours, 16 per cent below planned level'
We seems to be making up for it now though.... and prices are still elevated.
Results and conference call next Thursday.
Lower CPI = win win. Cheaper tomatoes and higher stock prices. Happy days!
CPI
Catalyst?
Zac, I've only been investing for the last couple of years, and only have 6 UK equity holdings so far. They are AAF, CAML, CSN, LGEN, SMDS, UKW. They all have dividends over 5% except AAF, which I would say is more of a growth stock, but still with a decent dividend. I also have 4 US stocks, with good dividends.
Tichtich - I have a foot in both camps - dividend payers and non-dividend payers. For me both categories are growth in terms of trying to overall provide you with positive return (growth) on your investment.
With the L&G International Index Trust all I'm betting on (if that's the correct terminology) is that the global economy will continue to grow over the long term. Something its done for hundreds of years. Nothing else.
Out of interest which other dividend payers do you hold? Mine are LGEN, HHI, MRCH, HFEL, UKW, EAT and NCYF. Only UKW has come anywhere near the 5 & 10 year annualised returns delivered from the L&G tracker fund.
I'm down to 30% of my portfolio in dividend payers now. I fully intend to continue to reduce that contribution over time.
P.S. I take your point about dividend stocks. The reason I prefer them to more growthy stocks is because I'm a pessimist about growth over the coming years. But maybe that's just me being my usual over- pessimistic self.
Hi Zac. Sorry for the confusion. I was referring to the article linked to by get_rich_quick, which was the original subject of this thread. And although it's on the Yahoo Finance website, it's actually a re-post from the Motley Fool blog, as can be seen by the MF logo near the top of the page. I think Yahoo must have a deal with MF as I see them doing that all the time.
I’m on the south coast today and it’s been just a bit breezy for the past two days with more to come. Does this explain todays rise or is it just coincidence?
Ha, Ha.
Tichtich - not sure of the relevance of your first point. Where does Motley Fool fit into my post?
I'm the polar opposite to you. I actually want my investments to go up not down! I do agree with your statement regarding not taking too much notice of short term performance though. I invest for the long term so it's that performance that interests me. Out of my dividend paying holdings this is one of my better ones. So let's take a look at UKW annualised returns (with dividends reinvested) over 10, 5 and 3 years.
Here they are (10) +8.27%pa, (5) +7.32%pa & (3) +3.77%pa
Here's the same annualised returns from a global equity tracker fund - L&G International Index
(10) +10.59%pa, (5) +8.97%pa & (3) +10.32%
The differences mount up compounded over the long term. The above is the main reason why I'm slowly moving away from dividend paying investments.
Hi Zac.
1. The articles on the free Motley Fool blog are just superficial click bait intended to attract you to their paid subscription service (which I do subscribe to at the moment).
2. I can't see the point of worrying about one year total returns. They are meaningless if you are an investor rather than a trader, especially for dividend stocks. As long as UKW can continue increasing its dividend in line with RPI indefinitely, I don't care about the share price. That said, a fall in the share price could indicate investors' doubts about the long term sustainability of the dividend. But I think it has little to do with that and is almost entirely a reaction to high interest rates.
Personally, I would like to see my investments go down, as I have a lot of cash (well, short term bonds) that I'm hoping to invest at lower prices!
Brib - It does. It's not looking particularly promising for my dividend paying holdings this year to date though. If their share prices remain 'as-is' until year end here's my projected total return (capital & dividends) for 2023.
LGEN -3.1%, New City High Yield -5.0%, MRCH -3.3%, HHI +3.8%, HFEL -5.4%, EAT +0.9% & UKW -4.1%
I often ask myself why I bother with dividend paying holdings! Thankfully 70% of my portfolio is in global equity funds. I'd have been far better simply putting all of the above in a global tracker fund - my holding in L&G International Index is up almost 7.0% year to date.
That remains to be seen, as always