FTSE stocks have had a great run in 2025. In fact, the FTSE All-Share index is on the verge of delivering double-digit returns since the year kicked off, and we’re only six months in. Of course, not every business has enjoyed an upward streak, like Greencoat UK Wind (LSE:UKW), which is actually down by almost 10% since January.
However, despite the lack of positive sentiment from investors, management’s maintained dividends with plans to start hiking them even further as we move into 2026. As a result, investors can now lock in a staggering 8.5% dividend yield – one of the highest on the market that’s set to grow even further.
The bull case
Being an owner of a vast wind farm portfolio has its perks. With the government pushing for a Net Zero energy grid by 2030, demand for wind power, along with other renewables, is on the rise. Higher interest rates have certainly been testing. But, management’s proactive approach to addressing balance sheet leverage has enabled dividends to keep flowing to investors even with falling energy prices.
Across its 49 wind farms, the company is now generating close to 2% of the UK’s total energy demand. And with further investments planned, its current generating capacity appears set to expand as the firm targets £1bn in net cash generation between 2025 and 2030.
In terms of dividends, that means shareholder payouts will rise from 10p in 2025 to 12.3p by the end of the decade. And that’s under the assumption that its average wholesale price of electricity stays between £66 and £57 per megawatt-hour (MWh) over the next five years. That’s a modest assumption compared to the current rate of £81.45/MWh as per June forward contracts.
In other words, providing that energy prices don’t collapse below management’s conservative forecast, this FTSE dividend seems to be sustainable.
The bear case
Even if energy prices fall in line with expectations, there are plenty of other challenges Greencoat has to tackle. Most notable is the threat of interest rates. While they’re slowly falling, a reversal of this trajectory would add severe pressure to the group’s financial health, especially if energy prices don’t rise alongside it.
At the same time, the company’s at the mercy of the weather. Lower wind speeds have already caused the group’s energy generation performance to come in 11% under budget in both 2023 and 2024. And if this pattern continues, that means less free cash flow generation to service debts and pay out dividends.
But let’s assume everything does go to plan. Wind speeds pick up, energy prices rise, and interest rates get cut. Even in this scenario, the group’s still subject to limited growth potential as a result of the previously mentioned Electricity Generators Levy.
The bottom line
With the bear case in mind, it’s easy to understand why Greencoat’s lost much of its appeal compared to a few years ago. Yet, despite these challenges and limitations, I remain bullish overall.
The FTSE stock’s trading 21% below its net asset value – a discount that even management’s begun capitalising on with share buyback schemes. Pairing that with a juicy 8.5% dividend yield that looks primed to grow even higher over the next five years, makes this an income stock worth considering, in my mind.
