Dividend investors have been piling into Legal & General shares recently and it’s easy to see why. Currently, these shares offer a yield of a whopping 8.5%. There are other UK dividend stocks with higher yields than this however. Here’s one that’s currently trading for less than £1.
A 75p dividend stock
The stock in focus today is NextEnergy Solar Fund (LSE: NESF). It’s an investment company that focuses on solar energy and energy storage infrastructure (and is currently invested in over 100 assets).
Its objective is to provide shareholders with attractive returns, predominantly in the form of regular dividends. Listed on the London Stock Exchange‘s main market, it currently trades for just 75p.
A huge yield
Now, analysts’ dividend forecasts are not always accurate. And dividend payments are never guaranteed, of course.
However, for the year ending 31 March 2026, City analysts expect this stock to pay out 8.5p per share in dividends. That translates to a yield of a massive 11.3% at today’s share price of 75p, so this stock could be a cash cow.
Lots to like
Looking beyond the enormous yield here, there are several things to like about NextEnergy Solar Fund from an investment perspective, in my view.
For a start, the company’s operating in growth industries. According to Mordor Intelligence, between now and 2030, the UK solar industry is set to grow by around 19% a year. The UK energy storage market’s projected to grow at an even faster pace, with several research firms forecasting growth of around 35% a year between now and 2030. This market growth should provide a supportive backdrop for the company.
Secondly, the fund benefits from government support. In its most recent trading update, it said the majority of its long-term cash flows are inflation-linked via UK government subsidies.
Third, it’s currently trading at a significant discount to the net asset value (NAV) of its assets (meaning there could be some value on offer). At the end of June, the NAV per share was 95.1p – about 27% higher than the current share price.
Finally, the fund could be set to benefit from lower interest rates. If rates were to come down, it would most likely be looking at less interest on its debt (debt’s used to fund solar farm projects).
Worth a look?
There are plenty of risks here, of course. Dividend risk is one. Recently, dividend coverage (the ratio of earnings to dividends) has been quite low, meaning that in the years ahead, there’s a chance of a lower-than-expected payout.
Share price risk is another. Recently, sentiment towards clean energy investments hasn’t been great and this may persist.
Interest rates are also worth mentioning. If they were to rise from here, it could put pressure on profitability and impact dividend payments. However, I like the story. I think this stock’s worth considering for income as part of a diversified portfolio.
