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Why SSE and this 5.8% dividend stock could shine in the low-carbon economy.

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I think the future looks a little brighter for SSE (LSE: SSE) now that it has agreed to sell off its troublesome Energy Services business to Ovo Energy in a deal worth £500m.

The transaction is on course to finalise by early 2020 as long as the firm receives regulatory approvals. When the money comes in from the sale, SSE plans to pay off some of its debt — that always a good idea in my view, especially when borrowings are high as in SSE’s case.

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Focus on the low-carbon economy

Chief executive Alistair Phillips-Davies said in last week’s news release that after the disposal, SSE will apply “even greater focus” to developing, operating and owning renewable energy and electricity network assets as well as businesses that complement those core activities.

He reckons SSE will be “well placed” to create value from the UK’s transition to a low-carbon economy because of its large and growing renewable energy project pipeline and its “leading” position in the electricity networks needed to deliver energy to homes and businesses.

Meanwhile, with the share price near 1,220p, the forward-looking dividend yield for the trading year to March 2021 sits at just over 6.7%. And now that SSE is finally moving on with this deal, I think the stock looks more attractive than it has for a long while.

But I’m also keen on Bluefield Solar Income Fund  (LSE: BSIF), which invests in UK-based solar assets. Indeed, it’s rare for me to be able to drive very far out of town without passing a field of solar panels these days. And when I do, it makes me feel warm all over because it seems like we are doing the ‘right’ thing about energy generation.

I certainly like the low visual profile that solar panels have compared with wind generators, which can spoil an otherwise beautiful vista. And it makes sense to me to go for capturing solar energy over wind energy because there’s always a degree of energy available from the sun in daylight hours, whereas the wind can often fail to blow.

Efficiency gains and money from the sun

So, I’m pleased to have stumbled across this potential investment today. And the full-year report reveals to us sound progress from the firm. Net asset value per share rose just over 4% in the trading year to 30 June, to a shade under 118p, which compares to the current share price near 130p. Meanwhile, underlying earnings per share moved more than 15% higher than last year, and the directors pushed up the dividend by almost 12%.

Bluefield Solar’s strategy is simple enough – to buy high-quality UK-based solar assets that are accretive to the Company’s NAV and dividend-paying capacity.” And after a period of asset building and acquisitions, the development activity has slowed over the past three years or so. That’s partly because asset prices in the sector have risen, but the firm has applied its efforts instead to optimising the portfolio for efficiency and bolt-on enhancements.

The financial outcome for the year was “outstanding” and beat the company’s earnings targets, partly because of increased operating efficiency and because the sun shone a lot in the period.  I think the firm’s forward-looking dividend yield close to 5.8% for the trading year to June 2020 looks attractive.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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