NextEnergy Solar Fund reconfirms its dividend prowess in full-year results

NextEnergy Solar Fund (NESF) has reaffirmed its prowess as an FTSE 350 dividend-paying powerhouse after releasing 2024 full-year results.

The solar energy-focused Investment Trust increased total dividends by 11% for the twelve months ended 31 March 2024, distributing dividends of 8.35 pence per share compared to 7.52 pence in the prior year period.

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NESF has a reliable dividend yield of around 10%, which is covered 1.3x, suggesting little risk to payouts in the medium term. NESF is targeting 1.1x – 1.3x cover for the year ending 31 March 2025.

The increased dividend payout was supported by the expansion of installed capacity, which breached 1GW to stand at 1,015MW at the end of the period.

In addition, NESF has launched innovative initiatives to manage its capital, such as a capital recycling programme involving the sale of assets – one of which provided a 100% premium to its holding value.

“Over the year, NESF accomplished several impressive milestones,” said Michael Bonte-Friedheim, CEO & Founder of NextEnergy Group.

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“These included the energisation of four new assets totalling 345MW, reaching over 1GW of net operating capacity, paying a fully covered full-year dividend of 8.35p per ordinary share, and achieving excellent returns for shareholders from our phased Capital Recycling Programme which has delivered significant value. With the recent announcement of an increase in dividend target to 8.43p, NESF is currently offering a dividend yield of approximately 11%, which stands as one of the highest in the sector and FTSE 350.

“NESF has been a key contributor to the UK’s progress towards its Net Zero targets to date and is well positioned to continue to be in the future.  The majority of NESF’s operating assets are located across the UK and have been essential in increasing domestic renewable energy generation and helping strengthen the UK’s energy security and independence.” 

NESF Net Asset Value

NextEnergy Solar Fund’s net asset value per ordinary share stood at 104.7 pence as of 31 March 2024, a decrease from 114.3 pence as of 31 March 2023. The ordinary shareholders’ net asset value was £618.6 million, down from £674.4 million at the end of the previous fiscal year.

The reduction in NAV was mostly due to lower energy price forecasts and a higher valuation discount rate. Should interest rates fall, discount rates would likely follow suit, providing a boost to NAV, although this is not a foregone conclusion given the relationship between discount rates and underlying base rates has a degree of variability from company to company.

Despite a lower NAV, the income generated by NESF increased slightly to approximately £80 million compared to around £79 million in the prior year period.

Increased income further demonstrates the opportunity in the trust’s share price, currently trading at a circa 27% discount to the NESF’s NAV.

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