Is Greencoat UK Wind a buy?

Greencoat UK Wind shares are up 40% in eight years. Here are a few reasons why I will be adding them to my portfolio in the coming weeks.

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Undoubtedly, the IPCC report released this summer has come as a wake-up call to many. With global temperatures set to rise precipitously in the next few decades, the only reasonable course of action is for governments around the world to make the switch to renewable energy – and fast.

While we don’t know what will be said or agreed to at the COP26 later this year, investors may now find themselves in a once-in-a-lifetime position with the chance to get in on the ground floor of the green revolution before it kicks into high gear.

But where should I start? There are dozens of new companies springing up all other the world, each promising to revolutionise the energy industry with their new, fantastic technology.

One that has been around for some time, however, is Greencoat UK Wind (LSE: UKW).

What is Greencoat UK Wind?

Greencoat is an investment group that focuses on finding and funding promising wind farms within the UK. It is currently a shareholder of over 30 wind farms across the British Isles and was the first renewable infrastructure group to list on the London Stock Exchange in 2013, which makes it ancient by the standards of the sector!

Since first listing, its initial price of 120p has been on a steady incline, reaching an all-time-high of 150p shortly before the Coronavirus pandemic. Today it sits at 141p, has a price-to-earnings ratio of 13:66 and pays a yearly dividend of 5.06%. Not bad, and much better than I’ll get from a savings account.

What’s not to like?

My largest concern is less with the company or its future, but with the short term, and rising interest rates.

As always, we must be careful when investing. Situations in the market can change, both for good and ill, and many new investors – eager to get in on the action – are particularly vulnerable.

Scammers recently attempted to fool investors by claiming to offer shares in ‘Corriegarth Wind Energy’. Greencoat UK Wind does hold a subsidiary named Corriegarth Wind Energy Limited, which owns and runs the Corriegarth Wind Farm; however, it did not publicly offer any shares in the farm and has posted on its website that the authorities have been alerted.

All told, for me, there isn’t much to dislike. Despite some unfavourable net asset value (NAV) numbers, the UK Government’s recently announced pot of £265 million for clean energy companies could help to offset some of the costs of expansion, and the long-term nature of wind farm contracts allow us a glimpse into the group’s earnings over the next decade, a privilege uncommon in the world of investing.

On top of that, demand for wind energy is also likely to increase as the public puts pressure on world leaders to take significant action against the climate crisis. The UK, unlike many countries, is in a prime position to make wind power its primary energy source, as it has some of the strongest prevailing winds of any country in the world. I plan to add Greencoat UK Wind shares to my portfolio over the coming weeks. 

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 assessed. Consider taking independent financial advice.

James Reynolds does not have a 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.

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