Foresight Solar Fund (LSE: FSFL) is a UK-listed closed-end investment company dedicated to investing in ground-based solar power plants. Managed by independent infrastructure and private equity firm Foresight Group, the solar fund offers a steady income from a portfolio of cash-producing assets.
Financial incentives
With near exponential growth in renewable generational capacity in the UK and across Europe, Foresight Solar is set to take advantage of current trends in power generation. And what makes this sector so exciting for income investors is the regulatory regime and the financial incentives to generate renewable sources of energy.
The guaranteed long-term nature of government subsidies (put in place to meet legally binding targets for renewable energy generation), the visibility of pricing and inflation linking, all underpin the defensive nature of investing in solar assets.
Acquisitions
In the first half of 2017, Foresight Solar made two significant purchases, the first being the 72MW acquisition of Shotwick and the second the 50MW acquisition of Sandridge. The two deals raised its total installed capacity in the underlying portfolio to 470MW.
Foresight Solar today announced the fund’s net asset value (NAV) increased to £432.8m in the six months to 30 June, which lifted NAV per share to 104.6p, an increase of 1.7% since 31 December. As such, shares in the fund currently trade at a modest 5% premium to its NAV.
In the present low-interest-rate environment, the solar fund offers tempting, low-risk income which beats most utility stocks. With a quarterly dividend of 1.58p per share, the company is on track to pay a total dividend of 6.32p per share in 2017, which gives its shares a yield of 5.7%.
Fast-growing
Another dividend stock worth considering is Prudential (LSE: PRU). The London-listed insurer still offers good value as the group is well positioned for further growth.
The Pru’s recent interim results showed its Asia business continuing to drive robust growth as operating profits there rose 16% to £953m, against overall growth of 5% for the group in the first half. There’s also further growth potential as insurance penetration in the region remains relatively very low and there is considerable scope for catch-up growth.
The insurer said that it had today sold its broker-dealer network in the US in a deal worth up to $448m. This follows on from news last week that the Pru is to merge its M&G asset management business with its UK & Europe life assurance division, which has been fuelling rumours that the group may break up to focus on fast-growing markets in Asia.
Scope for further dividend growth
Such a move may unlock ‘hidden’ value for shareholders. The Pru trades in line with its slower-growing UK and European peers, which suggests the group may be worth less than the sum of its parts. But whether a break-up is imminent or not, I reckon the stock remains a tempting dividend growth play.
With a Solvency II ratio of 202%, the insurer is awash with cash, meaning there’s plenty of scope for further dividend rises in the years to come. Moreover, earnings growth is supportive as City analysts expect Prudential’s bottom line will rise by 8% this year and 5% in 2018.
