The Motley Fool

2 FTSE 250 renewable energy funds offering BIG dividends

Windmills for electric power production.
Image source: Getty Images

There can’t be many hotter investment spaces right now than the renewable energy sector. Concerns over climate change and the move away from fossil fuels have led to an influx of big money into the area over recent years. Today, I’m looking at two established FTSE 250 constituents that not only provide exposure to green sources of power but also offer sizeable dividends to boot.

Chunky dividend 

First up is Renewables Infrastructure Group (LSE: TRIG). This fund has exposure to a portfolio of 79 projects with a net capacity of over 1900 megawatts. Over half of these are based in England, Wales, and Scotland. The remainder, for the most part, are in Sweden, France, and Germany.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

In terms of actual assets, there’s a clear focus on wind farms here. No less than 58% comes from onshore sources, with 32% obtained from offshore projects.

In contrast, solar energy projects account for just 9%. However, it’s clear that the company is looking to increase this part of its portfolio. Last month, TRIG announced that it had acquired four such sites in Spain. This should help boost earnings spread which, in turn, should be good news for dividend hunters.

As mentioned earlier, one of the main draws from holding TRIG is that income stream. The consensus from analysts is that the near £3bn-cap fund will return 6.76p per share in FY21. Using the current share price, that becomes a yield of 5.2% — one of the highest available in the FTSE 250. As a comparison, the index itself yields just 1.9%.

Also available…

As previously mentioned, TRIG certainly isn’t the only option for investors. Indeed, another UK-listed fund — Greencoat UK Wind (LSE: UKW) — offers an identical 5.2% dividend yield.

Greencoat has also been snapping up assets lately. In September, it announced the acquisition of Andershaw Wind Farm for £121m. Another one of the things I particularly like about this space is that demand tends to be fairly consistent due to utility firms being legally obliged to get a certain amount of power from green sources. 

This is not to say there aren’t potential drawbacks to both funds. Being dependent on natural resources (ie, things we can’t control), there’s a possibility that sources won’t produce as much electricity as desired. One also shouldn’t discount the high costs involved in installing and maintaining wind and solar farms.

Seen purely from an investment perspective, the huge interest in this space theoretically increases the odds of paying too much for a slice of the renewable pie. It’s worth pointing out that dividend hikes, while very consistent so far, aren’t exactly massive either (1%-2% per year). 

Stay diversified

Despite these potential headwinds, TRIG and UKW are just the sort of stocks I like for generating passive income. Bar the odd mood swing from Mr Market (each fell roughly 30% in March 2020), I suspect one or both could be held without issue ‘forever’. And if those dividends were reinvested, the eventual returns could be very decent.

Having said this, the need to stay appropriately diversified is as important here as it always has been. In practice, that would mean me picking up a few funds or stocks that have very little relevance to renewable energy. There’s no shortage of options out there when I last checked.

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Paul Summers 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.