When I last wrote about the firm in June last year, it planned to raise £40m or so from a placing of new shares to pay down debt and to make new investments. The placing went ahead the following month and it was “significantly oversubscribed”. Since then, the firm has made around six acquisition announcements, mostly regarding anaerobic digestion plants, as well as a wind farm in Wales. The investments the firm made cost much more than the £40m raised and were financed with debt too.

Shares in demand

However, JLEN raised another £15.5m in a placing in March and aimed for another £50m capital raising event in October, which ended up being oversubscribed again. So the company raised the stakes and pushed the limit higher in the October share placing, eventually raising £105m. Even then the placing was oversubscribed, so it seems there is plenty of investor appetite for shares in the company and for the sector it operates in. Happily, JLEN was able to use all the money raised to completely pay off all its debt, so the balance sheet is strong.

In today’s half-year results report, the company said its net asset value is a smidgen over 100p per share, which compares well to the current share price close to 105p, suggesting the stock market is assigning the firm a reasonable valuation. The projected dividend yield for the trading year to March 2020 is a tempting-looking 6.3% or so.

The company arrived on the stock market with its initial public offering in March 2014 and has been building up its portfolio of investments at a fast pace. There were three acquisitions in the first half of the year worth a little over £54m, which raised the total number of investments to 27 with a renewable energy generating capacity of 274.2 Mega-Watts (MW). The entire portfolio was recently valued at £488.9m, which compares to the firm’s market capitalisation of around £527m.

Further growth potential

The valuation is close to asset value, but the firm is also producing revenue and profits from its assets. The directors said in the report that electricity generation from the solar portfolio was 2% ahead of budget in the period and generation across the anaerobic digestion portfolio was 4% above budget. However, the wind portfolio didn’t fare as well and generation came in 12% below budget “due to very low wind speeds during the period.” Let’s hope that the projected wind speeds weren’t over-hyped in the selling process when JLEN invested in the assets. Time will tell. Meanwhile, performance at the company’s environmental processing plants was in “line with expectations”.

Looking forward, JLEN said its Vulcan anaerobic digestion upgrade project is under way and is expected to double the capacity of the asset. There is also a “strong pipeline” of potential acquisitions for further growth. I continue to believe that JLEN looks like an overlooked gem and the dividend yield is tempting.

However, there are other stocks out there that can provide similar returns with much less risk making them the perfect long-term investments. 

HICL Infrastructure (LSE: HICL) is a perfect example. This company specialises in infrastructure investment, a low-risk, high-return asset class where investments are made on a multi-decade time frame and investors can profit from net asset value growth and dividends. 

Over the past five years, NAV growth and income has given a total return of 10.2% per annum, although gains would be in the mid-teens if you include dividend reinvestment. 

This double-digit growth rate looks set to continue. According to the company’s figures for the six months to 30 September, annualised NAV grew by  8.9% for the period including dividend growth. After this expansion, the NAV per share is 151.6p, compared to the 31 March value of 149p. For the year management is targeting aggregate dividends of 7.85p per share, rising to 8.25p for fiscal 2018 giving a dividend yield of 5% for this year and 5.3% for 2018. 

Stability in infrastructure 

As a long-term growth investment, I believe that HICL ticks all the boxes. While growth may not be as fast as the likes of Boohoo.Com, it is highly predictable. For example, this year the company has made investments in regulated utility Affinity Water and High Speed 1 rail assets for a total of £452m, and the overall portfolio has a weighted average life of more than three decades.

These investments should produce steady returns for many years to come giving both investors and management a bright outlook for growth as well as returns. 

Even though the shares trade at a 5% premium to NAV, I believe that this is a premium worth paying for the defensive growth on offer.  

Renewable energy income 

John Laing Environmental (LSE: JLEN) has many similar traits to HICL. The company invests in the environmental infrastructure market, which is expanding rapidly. 

John Laing Environmental invests in many different assets, but renewable energy assets are a large part of the portfolio. Unfortunately, this has held the company back this year, with management noting in today’s half-year results for the period to 30 September 2017 that NAV per ordinary share declined to 99p from 100.1p as previously reported primarily due to the decrease in forecast electricity prices during the period. 

Still, management continues to look for opportunities to invest further and is on target to produce a net annualised return of 7.5% to 8.5% on its IPO price over the long term as well as aiming to pay a dividend that increases in line with inflation. 

A dividend payout of 6.3% is targeted for 2017 giving a dividend yield of 6.1% at the current price. With steady high-single-digit returns expected for the foreseeable future, John Laing Environmental is one stable growth stock I’d be happy to buy and forget for the next decade. 

The directors want to use the net proceeds to repay the firm’s credit facility and allow investment in “a near-term pipeline of attractive opportunities across Wind, Biomass and Anaerobic Digestion.”

The right place at the right time

I think the news is encouraging because it means the directors see opportunities to grow the company, which implies the sector is attractive. The firm operates as an environmental infrastructure investment fund with a stated aim of providing shareholders with a sustainable dividend paid quarterly that increases in line with inflation. Cash flows not required for dividend payments will be reinvested to “preserve the capital value of the portfolio.”

To me, JLEN looks like a potentially stable investment opportunity operating in the right place at the right time. The firm’s portfolio is stuffed with onshore wind, PV solar, and waste and wastewater processing projects in the UK and France. That’s a sector with a tailwind, I reckon, and the directors point out that wind and solar projects benefit from the British and French governments’ commitment to support low‑carbon electricity targets. Meanwhile, waste and wastewater processing projects benefit from long‑term contracts backed by the UK government.

The timing could be right

If it goes ahead, the placing should complete during July, so ‘right now’ could be a good time to take a position in the share. A placing will dilute your percentage share of the overall company if you hold the shares before it happens, of course, but you will end up with a smaller portion of a larger enterprise. There is a good chance that the positive signal the placing news sends to the market about the firm’s growth potential could cause the shares to drift up. After all, forward prospects are arguably improving.

Today’s share price of 108p puts the firm on a price-to-earnings ratio of 11.6 with the dividend yielding 4.3%. The firm arrived on the stock market during 2014 and is still building up its asset base. But during 2016 – the third year of trading since the IPO – the firm delivered what the directors describe as a “satisfactory” operational performance as electricity prices improved and wind conditions varied. 

A defensive sector

Last year, the firm invested £53.9m in four acquisitions and ended the period with 19 operational projects. This proposed placing will enable the firm to invest in more of what looks like a good thing. The sector is defensive and I’m optimistic that JLEN’s assets will be capable of delivering strong, reliable cash flow that is resilient to the effects of ongoing macroeconomic cycles.

I reckon an investment here could lead to a reliable and growing dividend stream and gentle, stable capital appreciation in the years to come.

GlaxoSmithKline (LSE: GSK) is struggling with the increase in generic competition, as its major blockbuster drugs lose patent protection. Advair, GSK’s best selling respiratory drug, saw revenues fall 21% to £392 million in the first quarter of 2015, as it faced a fall in market share and pricing pressures.

Although its consumer healthcare and vaccines business is doing better, weakness from its pharmaceutical business continues to act as a drag on earnings. With adjusted EPS expected to fall another 16% this year, GSK can no longer afford to sustain further dividend increases. Management has said that it intends to keep its dividend at 80 pence annually until 2018.

They also expect adjusted EPS will grow in the mid-to-high single digits over in the five years from 2016 onwards. But, intensifying competition for Advair could offset the gains from the sales of new respiratory products. So, despite its 5.9% dividend yield, GSK is relatively unattractive.

SSE

Weaker wholesale electricity prices had weakened the margins of SSE’s (LSE: SSE) wholesale electricity generation business, and this trend is likely to continue as lower fuel prices will continue to exert downward pressure on wholesale electricity prices. But, it’s diversified generation mix should dampen the effect of lower wholesale prices, because its renewable capacity depends more significantly on government subsidies. In addition, it is set to benefit from the introduction of the capacity market in 2018/9.

SSE’s sizeable regulated networks business means that its earnings are generally more stable than other power generators. With a regulated asset value of £7.35 billion, its regulated networks business now accounts for just over half of the utility company’s operating profits. Its regulated asset base is also growing rapidly with the need for more investment to connect generation from renewable sources. This should enable SSE to deliver sustainable dividend growth. Its shares currently yield 5.6%

Infinis Energy

Renewable energy generator, Infinis Energy (LSE: INFI) has an impressive dividend yield of 9.3%. Lower wholesale electricity prices and less windy conditions last summer caused adjusted net income to fall 7.6% to 36.3 million.

As the business is highly cash generative, the company had sufficient free cash flow to fund its dividend payments and its capital investment needs in 2014. Its strong pipeline of new wind projects should mean that Infinis Energy’s dividend yield is sustainable in the medium term.

Infinis Energy has 43 MW of new wind plant capacity currently in construction, which will be mostly be unaffected by the withdrawal of the government’s Renewables Obligation subsidy for onshore wind farms. Even under the new contract for difference (CfD) regime, returns are still attractive; and Infinis Energy plans to continue to meet its 700 MW of renewable generation capacity target by 2017.

With a dividend yield of over 9%, Infinis Energy is an attractive income stock.

John Laing Environmental Assets

Structured in a similar way as John Laing Infrastructure Fund (LSE: JLIF), John Laing Environmental Assets (LSE: JLEN) invests primarily in in renewable energy, water treatment and waste management projects.

The fund targets an internal rate of return (IRR) of between 7.5% to 8.5%, and its fund manager currently charges a 1.0% management fee of the fund’s adjusted portfolio value. Even with the end of Renewables Obligation subsidy for onshore wind farms, the fund still has an attractive investment pipeline.

Its shares currently trade at a 4.3% premium to its net asset value (NAV), and yields 5.6%. The fund’s dividend is expected to grow in line with RPI inflation, but NAV growth is likely to be limited. This should mean that capital appreciation for the fund is also going to be limited.