Solar panel investment fund

As an introduction, NextEnergy is an investment fund that focuses on solar energy infrastructure assets. It owns a series of assets throughout the UK with a total energy generation of 865MW, as I write.

Solar energy has risen in prominence in recent years, like many other renewable energy options. This is because the planet battles climate change, and many governments are looking to cut harmful carbon emissions.

So what’s happening with NextEnergy shares currently? Well, as I write, they’re trading for 103p. At this time last year, the stock was trading for 94p. This is a 9% return over a 12-month period.

To buy or not to buy

So what are some of the pros and cons of me buying NextEnergy shares?

FOR: A major positive for me is the current renewable energy market as a whole, as well as NextEnergy’s growth to date. Renewable energy around the world is a burgeoning market as everyone races to create alternative fuel solutions, in line with increasing demand for electricity. NextEnergy has grown its estate consistently since it began. It has grown its output year on year for the past eight years. In addition to this, its costs remain largely fixed, which could help boost growth and shareholder returns.

AGAINST: As a real estate investment trust, NextEnergy must return 90% of profits to shareholders. The issue I have here is that it is using debt to finance growth. I am usually put off by debt so will keep a keen eye on its balance sheet.

FOR: As a potential dividend stock, NextEnergy’s yield looks solid right now. It has a track record of increasing its payout since 2015. This is important for me as I want to boost my holdings with stocks that pay regular and consistent dividends. In addition to this, the shares look cheap on a price-to-earnings ratio of just five currently.

AGAINST: As with any passive income stock, it is worth remembering that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. This is usually to conserve cash in times of economic volatility or unexpected events.

A dividend stock I would buy

Reviewing all the information at hand, I do like the look of NextEnergy shares. I believe it could be a great stock to boost my passive income stream as it operates in a growth market. I am conscious of the risks involved too, however.

I would be happy to add NextEnergy shares to my holdings.

Britain’s new prime minister, Liz Truss, doesn’t have the best track record when it comes to green energy technologies, especially solar. Yet the push toward renewables seems to be accelerating.

A recent study by Opinium Research surveyed the opinions of the British population and the investing community regarding this sector. It found that 66% want investments into renewables to increase, while 78% of investors with at least 10 years’ experience support more solar energy projects.

Those are some pretty encouraging numbers. And it’s what’s brought NextEnergy Solar Fund (LSE:NESF) onto my radar.

One of the best penny stocks to buy now?

The company is a renewable energy infrastructure fund. It owns a collection of solar energy assets across the UK with a total generating capacity of 865MW. That’s about enough to power 216,300 homes all year round, roughly equivalent to Newcastle and Brighton combined.

Over the last five years, NextEnergy Solar has rapidly expanded its asset portfolio. Today, it houses 99 solar operations versus 63 in early 2018. Pairing this expansion with a rise in electricity demand, the group’s revenue stream has grown by an average of 30% annually. And since its operating costs are almost entirely fixed, the recent surge in energy prices has launched profit margins to a massive 88.8%!

With the bottom line exploding, dividends have been doing the same. And today, the almost penny stock offers an impressive 5% dividend yield after management fees are taken into account.

The stock is trading below net asset value, even after rising 22% in the last 12 months, so shares of NextEnergy Solar are looking rather cheap, in my opinion. So are these the next perfect addition to my income portfolio? Maybe. But there are some other factors to consider first.

The challenges that lie ahead

As impressive as the group’s cash flows are, nothing comes risk-free. The most obvious threat that comes to mind is new government policy. As I previously mentioned, the PM isn’t an ally of solar energy. But given the level of support shown by the investing community, I’m less concerned about this and more troubled by the company’s debt.

As a registered Real Estate Investment Trust (REIT), 90% of net earnings are paid out to shareholders as dividends. This is wonderful for my portfolio, but less so for the business. Why? Because with virtually no retained earnings, management is dependent on external debt and equity financing to fuel future growth.

With interest rates on the rise, reliance on equity is likely to increase. And that could trigger a lot of dilution, potentially destroying shareholder value rather than creating it.

So far, management has proven its aptitude in avoiding this scenario. But it’s something I’ll be keeping an eye on. Overall, I’m cautiously optimistic about the future of this penny stock, and I may decide to add it to my income portfolio while the shares continue to look cheap.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

NextEnergy Solar Fund  

What it does: NextEnergy Solar Fund has invested in more than 100 solar power assets spanning the UK and Italy.

By Royston Wild. Renewable energy stock NextEnergy Solar Fund (LSE: NESF) hasn’t been listed on the London Stock Exchange for a considerable period of time. 

But since its IPO in 2014 it’s shown the hallmarks of a true Dividend Aristocrat. It’s lifted shareholder payments each year since then. Last year it raised the full-year reward 2% year-on-year to 7.16p per share. 

I think it’s a great stock to buy for reliable dividend growth. Electricity is of course an essential commodity today, so demand for power sourced from NextEnergy’s assets should remain strong at all points of the economic cycle. This gives added strength for a business seeking to increase dividends over the long term. 

I think NextEnergy’s focus on green energy gives it the edge over other electricity-producers, too. This is a highly lucrative industry as the transition away from fossil fuels heats up. Though remember that it’s also one where corporate profits can suffer during cloudy weather when energy generation can slump.

Today, this renewable energy income stock carries a 6.4% forward dividend yield.  

Royston Wild does not own shares in NextEnergy Solar Fund. 

Central Asia Metals

What it does: Central Asia Metals is an AIM-listed copper, zinc and lead production and exploration company, with operations in Kazakhstan and North Macedonia

By Paul Summers. With UK inflation poised to hit a staggering 18% next year as energy prices soar (again), I’m attracted to the dividends on offer from miner Central Asia Metals (LSE: CAML). A yield of 8.2% at the time of writing won’t be enough to offset the pain ahead but it certainly isn’t to be sniffed at. What’s more, this payout looks set to be covered twice by profit according to analysts.

Naturally, nothing is a given. Metal prices are notoriously volatile, making the near-term earnings outlook distinctly foggy for any company operating in this space. Nevertheless, the likely huge demand for copper going forward as the renewable energy revolution steps up a gear could prove a boon to this AIM-listed firm.

The income stock also appears very reasonably priced compared to sector peers, at just six times earnings. 

Paul Summers has no position in Central Asia Metals

Lloyds Banking Group

What it does: Lloyds is one of the UK’s largest financial services providers and currently the largest mortgage lender in the country.

By Dylan Hood. On the whole, rising interest rates are bad news for stock markets. However, one sector that tends to be robust during these times are banks. This is because as rates rise, they can charge more on their loans to customers. Although Lloyds (LSE:LLOY) shares are down 11% year to date, I think they could be a solid buy for my portfolio.

Firstly, they have a comfortable 4.8% dividend yield. This is comfortably above the FTSE 100 average yield of 3.9%. With inflation on the rise, reaching 10.1% in July, passive income is a great shield for my portfolio. In addition to this, currently trading at 44p, Lloyds shares have a cheap looking 7.3 price to earnings ratio. This is well below competitors HSBC and NatWest who both trade on P/E ratios of just under 10.

So, with a low valuation, meaty dividend, and favourable lending outlook, I think Lloyds shares could be a great buy for my portfolio for September.

Dylan Hood does not own shares in Lloyds

St. James’s Place

What it does: St. James’s Place is a leading provider of financial planning and wealth management services in the UK.

By Edward Sheldon, CFA. My top income stock for September is St. James’s Place (LSE: STJ). It’s forecast to pay out a dividend of 55p per share for 2022, which equates to a yield of nearly 5% at present.

One reason I’m bullish on St. James’s Place right now is that the financial environment is rather complex. High inflation, rising interest rates, stock market volatility, and falling bond prices all present challenges for those looking to save and invest for their future. This should play into the wealth manager’s hands. In this environment, its advisers can add value for clients, and help them stay on track.

Another reason is that the company is raising its dividend. For the first half of 2022, the company declared a payout of 15.59p per share, up 35% year on year.

It’s worth pointing out that if global stock markets continue to fall, the company’s profits could take a hit.

With the stock currently well below its 52-week highs, however, I think a lot of this risk is already priced in.

Edward Sheldon has no position in St. James’s Place.

Greencoat UK Wind

What it does: Greencoat owns a collection of wind farms scattered across the UK, generating clean electricity to power the nation’s homes.

By Zaven Boyrazian. With gas prices sending energy bills through the roof, alternative renewable energy solutions are rising in demand. Today only around 29% of electricity generated in the UK originates from renewable energy sources. But that’s considerably higher than 5% in 2012.

This continued shift away from fossil fuels has created lucrative opportunities for companies like Greencoat UK Wind (LSE:UKW). The business owns a portfolio of on- and off-shore wind farms that generate clean electricity.

Being a wind energy business, its revenue stream and earnings can be quite lumpy. Not to mention the regulatory energy price caps eliminate any form of pricing power.

But with operating margins well above 90%, any reduction in price caps is unlikely to compromise this business, I feel. And with most of the proceeds returned to shareholders in an inflation-adjusted dividend, Greencoat looks like an excellent income stock to own in my eyes.

Zaven Boyrazian owns shares in Greencoat UK Wind

Legal & General  

What it does: Legal & General is one of the UK’s largest financial and insurance firms with a focus on four key areas. 

By Charlie Keough. My top British income stock for September is Legal & General (LSE: LGEN]. With its share price taking a hit this year, this has pushed the stock’s dividend up to an attractive yield of around 9%.  

What I also like about L&G is the long-term dividend plan it set out back in 2020. This was part of a wider five-year ambitions programme. And within this, it has targeted a cumulative dividend ambition of £5.6bn-£5.9bn by 2024. In its latest update, it highlighted it was on track to achieve this.  

The firm has also managed to grow its cash levels since last year, which gives this dividend programme a platform to build up.  

The business may see investors batten down the hatches in the months ahead. And this will likely dent revenue. 

However, with inflation continuing to rise, I think this source of passive income could prove valuable in the months and years ahead. 

Charlie Keough does not own shares in Legal & General 

Lloyds

What it does: Lloyds is one of Britain’s biggest financial institutions. Its brands include Lloyds itself, Halifax, and Bank of Scotland. It earns the bulk of its revenue from mortgage loans.

By John Choong. According to analysts, inflation is now expected to peak at 18% in January. With interest rates still lagging behind inflation, the Bank of England will have to continue raising rates. Given that Lloyds (LSE: LLOY) earns its income from the difference in the cost of borrowing and lending, I expect its earnings to continue upwards; and with that, its dividends.

Although house prices are expected to decline in the near future, I hold the view that the increase in mortgage rates should offset any decreases in property valuations. Furthermore, with an excellent balance sheet, Lloyds doesn’t need to increase its savings rate to bring in more cash, thus allowing it to increase its profits.

So, with a low price-to-earnings (P/E) ratio of 7, and a price target of £0.64, I think Lloyds shares are an excellent pick as a defensive position for my portfolio. And what’s most lucrative is its dividend yield of 4.8%, which is expected to increase along with its margins.

John Choong has positions in Lloyds.

Persimmon

What it does: Persimmon is a housebuilder focussed on the UK market.

By Christopher Ruane. Some of the yields currently on offer in the London market are hard to get my head around. Take housebuilder Persimmon (LSE: PSN) for example. Its dividend yield is almost 16%. For a FTSE 100 member, that is unusually high.

Clearly many investors doubt that the company can sustain its payout and have pushed the share price down accordingly. Although the housing market still looks fairly strong, there is undoubtedly a risk that higher interest rates and a worsening economy could push down selling prices at some point. Persimmon raised its average selling price in the first half, although volumes slipped. It continues to have a healthily profitable business model.

With its thin cover, the dividend looks vulnerable in a downturn. But even if it was halved, it would still be almost 8%. Recognising the risk, I am tempted to add this income stock to my portfolio.

Christopher Ruane does not own shares in Persimmon.

Forterra

What it does: the company manufactures building products from clay and concrete. These include bricks, blocks, and paving.

By Stephen Wright. I think that Forterra (LSE:FORT) is a really interesting income stock. At current prices, it has a dividend yield of around 4.2%.

The company makes the ubiquitous London Brick, which has been used in around 25% of the UK’s housing. This is significant because it means that Forterra’s products are likely to be used in extension projects on those buildings.

It’s natural to think that bricks are something of a commodity, but this isn’t true. Forterra has shown an ability to increase prices to its customers, which indicates that its products are differentiated from those of its competitors.

I also believe that the stock is cheap. Forterra’s share price implies a price-to-earnings (P/E) ratio of around 10 and the company has more cash than debt. This makes it look to me like a strong business at a good price.

Stephen Wright does not own shares in Forterra.

National Grid

What it does: National Grid is an energy company, operating in the UK and eastern US. It provides both electricity and gas.

By Andrew Woods. The National Grid (LSE:NG) share price has fallen just 3% in the past three months. For the year ended March, the firm paid a dividend of 50.97p per share. At current levels, this constitutes a dividend yield of 4.49%. As such, it’s my income stock for September.

The company reported a 107% rise in pre-tax profit, totalling £3.4bn, for the 12 months to March. Furthermore, its dividend payment was 3.7% greater than in 2021. Much of this was down to higher electricity transmission as energy costs spiralled following the pandemic and the war in Ukraine.

One concern, however, is that profit margins may be tighter in the coming months. This could be due to the higher cost of securing energy sources, like natural gas.

Despite this, the business has operating cash flow of £5.3bn, and this may allow the company to engage in controlled expansion of its operations within the UK and abroad.

Andrew Woods has no position in National Grid.

Vodafone

What it does: Vodafone is a leading European mobile and broadband operator. In Africa, it runs mobile and payment services.

By Roland Head. My top dividend share pick is Vodafone Group (LSE: VOD). This well-known telecoms operator offers a 6.5% dividend yield and an improving outlook.

Vodafone’s latest trading update showed growth in Europe and continued expansion in Africa, where the company now has 186m mobile customers.

Currently, fewer than half of Vodafone’s African customers use mobile data or the group’s M-Pesa mobile money service. However, I expect the number of people using these higher-value services to continue rising, supporting long-term growth.

The main challenge the company faces in Europe is strong competition in mature markets. This has caused growth to slow in recent years.

However, changes are underway to increase network utilisation. Cost savings should also come as Vodafone gradually switches off its 3G services.

In the meantime, profit margins are improving, and cash generation remains good. This should support the dividend. I see Vodafone as a dividend buy in September.

Roland Head does not own shares in Vodafone.

NextEnergy Solar Fund

Investor interest in renewable energy stocks like NextEnergy Solar Fund (LSE: NESF) is accelerating sharply. This particular green share’s share price has exploded since its IPO in 2014 and just hit new record highs.

It’s not a mystery as to why they are becoming so beloved. Demand for clean energy is soaring as the fight against climate change intensifies. NextEnergy Solar owns around 100 assets that generate energy using the power of the sun.

The majority of these are located in the UK with a small number situated in Italy. And the business is expanding rapidly to maximise its position in this growing market. Its total installed capacity rose to 865MW from 814MW a year earlier.

The trouble with investing in renewable energy stocks is that energy production can be intermittent. In other words, they can stop producing electricity during adverse weather conditions, causing a negative impact on profits.

But all things considered I think NextEnergy Solar’s a great buy for long-term passive income. Solar energy demand is tipped to explode over the next decade (S&P Global analysts think solar and wind capacity will soar 47% in the decade to 2030).

What’s more, NextEnergy Solar’s essential operations mean that profits will remain stable even during downturns. This means it should have the financial strength to pay big dividends at all points of the economic cycle.

Banco Santander

The Banco Santander (LSE: BNC) share price meanwhile has slumped sharply in 2022. It’s a fall that reflects its highly cyclical operations and the prospect of profits crashing as the global economy cools.

Santander’s share price has been especially weak over the summer too. This is because of severe commodity price falls and the economic strain this will cause in Brazil. This is comfortably the bank’s single largest market by profits and customer numbers.

Yet despite these issues, I’m hugely tempted by the bank’s excellent all-round value. In particular I think its 7.3% dividend yield makes it a terrific way to boost my passive income. Santander’s strong dividend cover suggests it’s in great shape to make the full dividend payment that brokers are expecting.

I’m also consider Santander as a great way to boost my exposure to emerging markets. The bank’s broad geographic footprint — spanning The Americas and Europe — gives it extra resilience through diversification. And it provides access to the fast-growing Latin American region where product penetration is low and wealth levels are tipped to grow strongly.

Santander currently generates around 31% of underlying profits from Latin customers.

A top renewable energy stock

Demand for green energy is rocketing as steps to battle the climate crisis intensify. There are many UK shares I can buy to capitalise on this theme and NextEnergy Solar Fund (LSE: NESF) is near the top of my list.

NextEnergy invests in solar farms in Britain and Italy and had 865MW of capacity at the end of last year. Investing in solar shares can be risky as the costs of operating photovoltaic panels can be expensive and power generation (and thus profits) can take a hit if the sun doesn’t shine.

Still, I think the potential rewards on offer offset these risks as consumption of energy from solar sources looks set to soar. The International Energy Agency thinks 1,100GW of solar capacity will be added between 2021 and 2026. That’s double the rate of additions recorded in the previous five years.

Excellent all-round value

I particularly like NextEnergy because of the terrific all-round value it offers at current prices of 107p per share.

The renewable energy stock trades on a forward price-to-earnings (P/E) multiple of 10 times. A reading of 10 and below suggests that a share offers excellent value relative to its earnings prospects.

On top of this NextEnergy carries a mighty 7% dividend yield. In fact I’m particularly impressed by the company’s ability to keep growing the dividend (the board raised its dividend target for the eighth consecutive year earlier this month).

Another nearly penny stock that’s too cheap!

Stocking up on some defensive UK shares could also be a good idea as the domestic economy struggles. One such penny stock I’m thinking of buying for my portfolio is Residential Secure Income (LSE: RESI).

Having a roof over one’s head is essential in good times and bad. Consumer spending on accommodation therefore remains stable at all points of the economic cycle, giving Residential Secure Income exceptional profits visibility. Indeed the firm collected 99% of rents between October and December, latest financials showed.

This UK share works with housing associations, local authorities, and private developers to supply affordable housing. As well as having exposure to the fast-growing shared ownership segment, Residential Secure Income also operates in the increasingly lucrative retirement rentals business.

More terrific value for money

The robust earnings outlook for Residential Secure Income makes it particularly good for those seeking large dividends year after year. Under real estate investment trust (REIT) rules, the business is required to distribute 90% of yearly profits in dividends.

At current prices of 108p per share, Residential Secure Income carries a healthy 4.9% dividend yield. It also trades on a rock-bottom, sub-1 price-to-earnings growth (PEG) ratio of 0.8. I think it’s a top buy for my portfolio despite the risk that profits (and thus dividend) growth could suffer if it fails to identify suitable acquisition targets.

The insurance giant 

Legal & General (LSE: LGEN) has always been one of the top dividend payers in the FTSE 100. In the recent full-year results, the dividend rose another 5% to reach 18.45p. At the current share price, this equates to a yield of 6.5%, far higher than other FTSE 100 stocks. 

There is also evidence that this dividend is very well covered and sustainable. For example, the results were excellent. In fact, profit after tax managed to reach over £2bn for the first time, a year-on-year rise of 28%. This means that the coverage ratio of the dividend was 2. As such, the company remains cash-rich and can both invest money into the business and absorb any losses that arise. There are also ambitions to continue increasing the dividend each year up to 2024. This cements LGEN as one of my favourite passive income stocks. 

There is a slight risk due to the asset management sector. The turbulent nature of the stock market now means there is the possibility for assets to lose value, especially in the event of a stock market crash. But despite these risks, I still see LGEN as a ‘no-brainer’ buy for me. After its 2021 results, it has a price-to-earnings ratio of around 8, demonstrating very good value. With an ageing population, combined with the company’s annuities portfolio and pension risk transfer programme, demand also seems set to increase. I may add more LGEN shares to my portfolio. 

A renewable energy passive income stock 

Another passive income stock I own in my portfolio is NextEnergy Solar Fund (LSE: NESF). The renewable energy specialist has managed to increase its dividend year-on-year, and recently it announced another 5% increase to 7.52p per share. This is the fund’s eighth consecutive dividend increase. This also gives it a dividend yield of over 7%, even higher than LGEN. 

It said the recent dividend increase “reflects the strong position of the company, its secured revenue flows, strong operational asset base and attractive growth prospects”. This highlights the strong growth prospects for the renewable energy sector. These growth prospects should further develop in the current climate, where gas and electricity costs are soaring. 

The major risk is that the company has a cash dividend cover of around 1, meaning that there is no money left over the reinvest into the company. It also increases the chances of a dividend cut. 

But for now, the fund is performing well, and the dividend has continued to grow. It also far surpasses inflation. These factors are why NESF is a part of my portfolio already. And I feel that now is a good time to buy some more. 

Rising dividend

Legal & General (LSE: LGEN) has managed to see consistent dividend growth over the past few years. In fact, the full-year dividend has risen from 4.75p per share in 2011 to 17.57p per share last year. It is expected to see further growth this year when the full-year results are announced next month. As such, it currently holds a yield of around 6.5%, far higher than the majority of other FTSE 100 stocks.

Unlike some other dividend stocks, this high yield also seems sustainable. For example, it its first-half results, the company made operating profits of over £1bn. The full-year dividend is expected to cost just over £1bn, meaning that, provided full-year profits remain healthy, there should be plenty of cash to invest into the company.

Overall, I’m also confident in the prospects of the company. This is despite the risk of a slowing economy, which could strain profits, and potentially the dividend. Nonetheless, there is currently robust demand for the company’s pension risk transfer programme and its annuities portfolio, and with the ageing population, demand seems set to increase further. Accordingly, I’m looking to add more L&G shares to my portfolio.

A renewable energy dividend stock

Due to my concerns over the future of oil, I’m staying away from oil dividend stocks, and opting for renewable energy stocks instead. NextEnergy Solar Fund (LSE: NESF) is my personal favourite. As the name suggests, this fund owns multiple solar assets around the world, yet predominantly in the UK. Recently, it has added five additional operating solar assets, taking its total to 99. This means that the total installed capacity has reached 895MW, a 10% rise since March 2021.

Personally, the biggest attraction for me is the company’s large and growing dividend. In fact, it currently yields over 7%, surpassing yields of some major oil stocks. Especially in the context of global gas shortages and climate change, renewable energy is also becoming increasingly important. Therefore, I hope that profits, and therefore the dividend, can continue to grow.

There is one major risk with the dividend, however. Indeed, it currently only has a cash dividend cover of 1, meaning that all the profits are paid out as a dividend. If profits decrease, this means that the dividend may have to be cut. It also restricts the amount of cash being reinvested into the company.

Despite this risk, I’m still confident in the future of the fund, and even if the dividend must be cut, it would still have a large yield. It would also likely be a short-term problem. As such, I’ll continue adding NESF shares to my portfolio for a passive income.

I expect these two shares to offer a combined dividend yield of 6% in 2022 — and potentially for many years beyond. However, it’s worth remembering that dividend payments are never guaranteed. I wouldn’t plan to use my dividend income to replace cash savings.

#1: Solar-powered dividends

My first choice is NextEnergy Solar Fund (LSE: NESF), which operates solar farms across the UK,  Italy and Spain. At the end of September, NextEnergy had 99 assets with a total capacity of 895MW. These were valued at just over £1bn, so it’s a substantial operator.

You might think the UK is not the most profitable place to install solar panels, and I’d probably agree. However, more than 90% of NextEnergy’s generating capacity is backed by government subsidies and long-term power purchase agreements. This means revenue is far more predictable (and higher) than it would be otherwise.

Indeed, the biggest risk I can see for investors is that these government subsidies will be scaled back in future years. This might mean that some of NextEnergy’s UK operations would become less profitable — or even loss-making.

The good news is that its management is already taking steps to address this risk. One change is that the company is selling more energy directly to large electricity users, such as Budweiser brewer AB InBev. NextEnergy is also investing in battery storage and expanding its overseas operations in warmer countries where solar power is more productive.

NextEnergy stock currently trades broadly in line with its book value of 103p per share. Management has said it intends to pay a dividend of 7.16p per share for the year ending 31 March. This gives a potential yield of almost 7%. I think the shares are attractively valued and would buy them for passive income.

#2: Inflation-linked dividends

Wind power is a more obvious way to generate renewable energy on our small island. I’ve been following wind farm owner Greencoat UK Wind (LSE: UKW) for a number of years now and my view remains very positive.

Although most of Greencoat’s farms also receive subsidies, my feeling is that these may be less important. With generating costs coming down, I believe wind power will become profitable without subsidies in the UK.

My main concern with this business is that the rush of new money into renewables could push up the cost of acquiring new wind farms. That could put pressure on shareholder returns. However, Greencoat seems to have managed this risk successfully so far.

I’m also encouraged to see that respected City asset manager Schroders is buying into Greencoat Capital. Confusingly, this is a separate company that manages the investments made by Greencoat UK Wind.

The Schroders deal shouldn’t change anything for UKW shareholders. But I’m impressed by the City firm’s involvement. Schroders has a reputation for long-term thinking.

Greencoat shares offer a 5.3% dividend yield, based on management guidance for 2021. The company also aims to link dividend growth to inflation. For these reasons, I see Greencoat UK Wind as an attractive buy for my portfolio in the current market.

Recent trading update

A few weeks ago, NESF released a trading update up to the end of September. Here it announced that its net asset value (NAV) per share had increased to 103.1p. This is a rise of nearly 8% since March 2021. As the share price currently sits at 100p, this means that the fund trades at less than its NAV. This is fairly rare for renewable energy stocks, potentially indicating that NESF is too cheap.

The group also added an extra five operating solar assets, taking the total to 99. This means that the total installed capacity has reached 895MW, a rise of nearly 10% since March. Hopefully, this will allow the fund to increase profits.

The future also looks fairly positive. Indeed, the Chairman of NESF, Kevin Lyon, has pointed to factors such as “unprecedented high power prices in the UK, global gas shortages, and the recent UN climate change conference” to show that the switch to solar energy is required. As a result, I view NESF as a long-term stock.

The dividend

The dividend is also a major positive for the group and this year it has been raised by 1.5% to 7.16p per share. This means that it currently yields over 7%, far higher than the majority of other UK stocks. It’s also higher than other large dividend renewable energy stocks, such as Greencoat UK Wind, which yields around 5%.

But I do have some concerns about the dividend. Indeed, the current cash dividend cover is just 1, compared to 1.2 in the same period last year. This means that if profits fall, the dividend is very susceptible to being cut. It also means that there’s no money left for reinvestment into the company. 

Why have I bought this renewable energy stock?

As mentioned before, I feel that company profits will be able to increase, especially because of the increasing necessity for solar power. Therefore, I hope that the dividend will stay at its current level, and there may even be scope for it to rise.

Recently, it also diversified into the energy storage sector through a £100m joint venture with the battery specialist Eelpower. This adds a new source of profits for the company, another factor that will hopefully support the large dividend.

As such, I bought shares in NESF as a solid income stock, which is also slightly undervalued, especially in comparison to its NAV. I may buy more shares at its current price.

Playing the gold rush

Gold prices are rising sharply as inflation indicators continue to shock observers. The yellow metal has jumped around 70 dollars since the start of November to current levels of $1,865 per ounce. I think it could keep climbing too as it seems high inflation looks set to persist well into 2022.

I wouldn’t buy gold itself or a gold-backed financial instrument like an ETF to make money from this theme however. No, I’d buy dividend-paying UK mining shares which will benefit from rising precious metal prices.

Centamin (LSE: CEY) is one such dividend stock on my watchlist today. Right now, it offers a meaty 4.6% dividend yield for next year. I’d buy it despite the huge unexpected costs and production problems that mining shares are in constant danger of experiencing.

A penny stock for the green revolution

I’d also buy NextEnergy Solar Fund (LSE: NESF) for 2022, a UK share I think could provide excellent investor returns over the next decade. For next year, this penny stock carries a mighty 7% dividend yield.

I expect it to deliver big profits as demand for low-carbon energy steadily rises, meaning it should remain a generous dividend payer beyond next year too. NextEnergy has shelled out £200m worth of dividends since its IPO in 2014.

Renewable energy stocks like this are becoming increasingly popular as the theme of responsible (or ESG) investing takes off. This particular green share has invested in 99 solar farms across the UK and Italy. And, more recently, it’s dipped its toe into the battery storage sector, an industry that also appears set for strong growth due to its important role within renewable energy.

Generating power from solar panels can be temperamental and expensive. But I still think this could be a great share for long-term investors like me to own.

7.6% dividend yields

Any flare-up in the Covid-19 crisis could hit Georgia’s economy hard. This is owing to the rising importance of tourism to the country’s GDP. However, this isn’t stopping me thinking of buying Bank of Georgia (LSE: LSE: BGEO) for my shares portfolio for 2022. This particular share yields a terrific 7.6% for next year.

Rising inflation means that interest rates in the country are sitting at their highest for more than a decade at 10%. This is beneficial for the likes of Bank of Georgia as it allows them to make greater profits from their lending activities. Rates are likely to keep rising too as inflation in the country soars.

I also like this particular stock because personal wealth levels are on a long-term upswing that dates all the way back to the 1990s. Demand for financial products has soared as a consequence and looks set to continue surging as well. Interestingly, Georgia’s government expects national GDP to rise 6% in 2022.