Again, there’s no guarantee any of the companies mentioned below will always be in a position to return cash to holders, hence the need to stay appropriately diversified.

Green dividends

Renewables Infrastructure Group (LSE: TRIG) is a highly attractive option for tackling rising prices, in my opinion. The £3bn-cap company is expected to return 6.85p per share to holders in the current year. That’s a yield of 5.1%. By comparison, the FTSE 250 index can only offer 2.1% in passive income at the moment.

Another reason this company stands out for me is that it’s not missed a chance to hike annual dividends since listing on the UK market. True, these increases have been small, but I’d take this over big hikes that then become unsustainable.

At just over 15 times earnings, TRIG shares aren’t cheap, relative to the industry in which the company operates. However, they still look reasonably priced compared to the market as a whole. And buying here will allow me to tap into the sustainable energy trend that is only likely to get more popular with investors in the future. 

As a source of stable income, TRIG definitely grabs my attention.

Down… but not out

I’ve been a stockholder in price comparison website Moneysupermarket.com (LSE: MONY) since last year. While I originally bought in for its recovery potential, the dividend stream is welcome in the interim as inflation ticks higher. The forecast yield for this year stands at a solid 6.7%. 

One thing worth highlighting with Moneysupermarket is that profits only just about cover the payout. This could mean the company is forced to reduce its cash returns if (and that’s a big if) trading doesn’t bounce back as expected in 2022. Personally, I’m of the opinion that it will, hence why I remain invested here. Of course, I could be utterly wrong, which is why I’m also continuing to spread my money into other parts of the market.

Based on a 31% jump in earnings per share in 2022, MONY stock changes hands for a P/E of just under 13. For such a quality stock, that still looks a steal to me! But then I would say that.

8.3% yield from this FTSE 250 stock

Jupiter Fund Management (LSE: JUP) is by far the largest dividend payer of the three discussed here. Analysts have it returning an inflation-beating 8.3% in 2022.  

Similar to other asset managers, Jupiter is unlikely to have benefited from the poor start to the year for markets. It will be interesting to see what CEO Andrew Formica has to say about the outlook later this month. Full-year numbers are revealed on 25 February.

I’m also conscious that the company is not exactly consistent when it comes to raising its cash returns to investors. This may continue in the future if Jupiter is forced to reduce its fees to compete with rivals. The huge popularity of passive funds is another headwind. 

However, it seems that quite a lot of negativity is already in the price. Down 21% in the last 12 months, Jupiter shares now trade on a little less than 10 times earnings. I’d buy.

The post 3 inflation-busting FTSE 250 dividend stocks to buy appeared first on The Motley Fool UK.

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Paul Summers owns shares in Moneysupermarket.com. The Motley Fool UK has recommended Jupiter Fund Management and Moneysupermarket.com. 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.

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.

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.

The post 2 FTSE 250 renewable energy funds offering BIG dividends appeared first on The Motley Fool UK.

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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.

Today I’m looking at two companies with very different strategies which have the potential to provide a sustainable 6% yield and long-term capital gains.

My biggest holding

When Petrofac Limited (LSE: PFC) shares crashed following news of a Serious Fraud Office investigation last year, I bought heavily into the stock. So much so that this oil services group is now my largest holding.

It’s too soon to say whether this will prove to be successful investment. But today’s 2017 results suggest to me that this business is continuing to recover from the oil market downturn. The group’s core customers in the Middle East don’t seem too concerned about the SFO investigation and continued to award Petrofac new contracts last year.

Although revenue fell by 19% to $6,395m, underlying after-tax profit rose by 7% to $343m. Capital expenditure was cut by 44% to $170m, which helped to leave year-end net debt unchanged at $0.6bn. Free cash flow for the year was $281m, providing solid support for the $0.38 per share dividend.

Challenges remain

During the last oil boom, Petrofac drifted away from its roots as a capital-light service provider and started investing directly in major projects. This costly mistake is still being unwound.

The group announced today that it will exit the deepwater market, which means that it will have to try and sell its JSD6000 installation vessel. A non-cash charge of $176m was taken against this asset, presumably because these ships aren’t worth as much as they were when oil traded at $100 per barrel.

The other big exceptional charge was a $179m impairment which related predominantly to the Greater Stella project in the North Sea, “following a re-assessment of planned production profiles”. I read this as suggesting that oil and gas production from this project won’t be quite as profitable as planned.

I’d still buy

I’m happy that the exceptional items declared today are genuine one-offs. And I’m comfortable with the growth in underlying profit and stable cash generation. With the stock trading on a 2018 forecast P/E of 8 with a prospective yield of 5.8%, I continue to rate Petrofac as a turnaround buy.

Safer than houses?

If you’d like a 6% yield with lower risk than Petrofac, then I believe my next stock might be of interest. Renewables Infrastructure Group (LSE: TRIG) invests in wind farms and solar projects, targeting sustainable dividend growth.

The group has expanded steadily since its flotation in 2013, but many of the firm’s acquisitions have been funded with fresh equity, so the group has remained free of debt. Last year’s results show that £230m of new assets were added to the portfolio last year, with funding from £110m of fresh equity. At the end of the year, the group had net cash of £10.6m.

Renewables Infrastructure’s share price hasn’t really done much since its flotation. The shares are worth 106p today, versus 101p in August 2013. But annualised dividend income has risen from 6.06p to 6.4p, maintaining a trailing yield of 6%. For pure income investors, I think this could be a good buy-and-forget stock.

The post Two unloved 6% yielders I’d buy today appeared first on The Motley Fool UK.

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• Down 45% in 5 years, this UK stock now offers a stunning 11% dividend yield!

Roland Head owns shares of Petrofac. The Motley Fool UK owns shares of Petrofac. 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.