The fund’s dividend yield was described as “attractive” and it was noted that it has lower debt levels than its solar peers
Many funds were knocked back to discounts to their net asset value after March’s coronavirus-triggered market correction and with renewables funds also hit by power price worries.
NextEnergy Solar, which at 6.8% has the highest dividend yield in the sector, was upgraded to a ‘positive’ rating from ‘neutral’ by Stifel, with its shares having settled at around a 5% premium to NAV.
Analyst Iain Scouller noted that the fund is currently the most diversified of the solar funds, with assets in the UK, plus around 20% of NAV in Italian assets and is looking to increase its overseas exposure to up to 30% of gross assets.
As well as a dividend yield described as “attractive”, the analyst praised the fund’s portfolio growth through acquisitions to reduce project-specific risk, and its access to a wider sector portfolio data through its WiseEnergy operational management arm, “which helps optimise production levels” compared to rivals.
NESF also has lower secured debt levels than its peers, with its net leverage also lower at 72% compared to 77% for Bluefield Solar Income (), and 76% for ().
It was noted that the trust has paid dividends since IPO that have increased annually in line with RPI but that with power prices and inflation levels having become less correlated, the board believes it is prudent to keep the future dividend policy under review.
“We assume this may result in a move away from RPI linkage to either a progressive or permanently unchanged dividend policy, a move similar to that introduced by many other funds,” the analyst said.
Read More: NextEnergy Solar Fund Ltd upgraded by Stifel on diversified portfolio and modest premium