What does a forecast dividend yield above 11% say about a stock? It immediately makes me think income investors need to take a closer look. But I also remember that an unusually high dividend yield can mean something has gone wrong.
I’m talking about The Renewables Infrastructure Group (LSE: TRIG), though I’m not sure anything fundamentally bad really has struck.
What is it?
The company describes itself as “a FTSE 250 investment company targeting resilient income and long-term capital growth from a highly diversified, cash-generative portfolio of renewables infrastructure assets“. That includes onshore and offshore wind farms, solar energy installations, and battery storage projects in the UK and across Europe.
As of December 2025, the investment trust had a reported net asst value (NAV) per share of 104p. With a 68p share price at the time of writing, that implies a huge 35% discount to NAV.
When a stock appears undervalued, it can be an opportunity to repurchase shares. And that’s exactly what’s happening right now. With FY 2025 results in February, management announced a new £150m share buyback programme.
Oh, and the board reiterated its 7.55p dividend target for 2026. That’s 11.1% of the current share price.
What to watch for
Being cautious, related news brings to mind a couple of potential dark clouds. I’m thinking of fellow FTSE 250 investment trust SDCL Efficiency Income Trust, which this month announced it’s winding down.
Debt had ballooned above a self-imposed limit. And attempts to reduce gearing by selling assets were floundering. The trust wasn’t able to get close to estimated book values. It seems it’s not a seller’s market for energy-related resources right now, except maybe oil.
At the end of 2025, Renewables Infrastructure had total debt of around £2bn. And the market cap of the stock is only around £1.6bn. At least net debt isn’t so high, so I’d hope this one won’t come back to bite investors.
But should future disposals be needed, might that December NAV figure come under scrutiny? And would the discount suddenly look less attractive?
At FY time, Chair Richard Morse did speak of “a challenging year impacted by policy uncertainty, low wind resource and lower power price forecasts, all of which weighed on the company’s valuation“.
Bright outlook
Forecasts show a positive outlook, with earnings per share growing slowly out to 2028. And we could be looking at a price-to-earnings (P/E) ratio of only 8.5 by then. One immediate caution does spring out, mind.
Analysts don’t expect the dividends to be covered by earnings in 2026 or 2027. And by 2028, we’d see only modest cover. Still, we’re not in favourable times for alternative energy right now, and short-term sentiment is weak.
Part of the company’s priority is “to restore dividend cover to historical levels“. And if the next few years go as hoped, this could definitely be one to consider before the next swing in global energy politics — which surely must come.
