Greencoat UK Wind shares: should I buy now?

Renewable energy is here to stay. Here are the reasons why I’ll be buying Greencoat UK shares in my portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Windmills for electric power production.

Image source: Getty Images

I reckon the renewable energy sector is just getting started and I see Greencoat UK Wind (LSE: UKW) shares as a great way to play the clean tech trend.

Greencoat UK Wind shares at a glance

Greencoat UK Wind is an investment trust that solely acquires and operates UK wind farms. I like the fact that the business is simple to understand.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

The company has 38 operating wind farms across the country. It has also invested in a UK wind farm that’s under development. This adds an element of construction risk.

Within the operating portfolio (by value), 70% is invested in onshore wind farms and 30% in offshore. I like that most of the assets are only up to 10 years old. This means that Greencoat UK Wind doesn’t have to worry about replacing old equipment for some time yet.

The investment trust earns revenue by selling wind energy to utility providers. I also like that these sales are usually based on contracts, which can last for decades. This means the stock can benefit from some degree of visibility over its long-term cash flows.

The UK’s goal for renewable energy

Last year, the Government announced its plans to make Britain the world leader in green energy. For me, the environment for UK renewable energy remains supportive, which should be positive for Greencoat shares in the long-term.

Following the 10-point plan laid out by the Prime Minister in November 2020, the UK is increasing its support for renewable energy. This includes boosting its efforts to buy offshore wind farms. I like that in the same month, Greencoat UK Wind announced that it had agreed to acquire a 49% stake in the Humber Gateway offshore wind farm.

The attractive dividend

Greencoat UK Wind shares offer a dividend yield of over 5%. And it aims to provide investors an annual dividend that increases in line with UK inflation.

This means in addition to some capital growth, if I invest, I could also expect a growing level of income. This is one of the reasons why I’d buy Greencoat UK Wind shares in my diversified portfolio.

What are the risks?

As with all investments, there are risks with the stock. This level of income generation is not guaranteed. There are several factors that could impact profits and hence the dividend. A reduction in government support, higher costs, low wind energy prices and competition could all impact Greencoat UK Wind.

The shares trade at a 15% premium to its Net Asset Value (NAV). This means that the investment trust isn’t cheap. But I’m not surprised given how investors have been income hungry, like me, during the coronavirus pandemic.


In September 2020, Greencoat UK Wind announced that it intends to raise capital through a share issuance programme. This will be conducted in various tranches over the next 12 months.

I should mention that the new shares will dilute the holdings of existing Greencoat UK Wind shareholders. But the the money raised will be used to pay down debt and to expand the wind farm portfolio. This in turn will diversify the overall portfolio and could make the investment trust a leading player in the UK wind energy market. As a long-term investor, this sound promising and is another reason why I’ll be buying Greencoat UK Wind shares in my portfolio.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Nadia Yaqub has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 top stocks to buy before the market rebounds

Edward Sheldon highlights three beaten-up stocks he'd buy before global stock markets stage a recovery from their 2022 declines.

Read more »