When it comes to low-risk investing, most investors seek dividend stocks. That is because of an assured payday. Companies that attract such investors demonstrate an ability to make profits in the long term. That is where Yieldco comes in.
However, impact investors don’t just put their money in any lucrative stock. A high-yielding stock may not fall in the impact investing space, making Yieldco the go-to option.
So, what is Yieldco, and how does it benefit you as an investor? What are some Yieldco stocks to invest in? This article has the answers for you! Read on for detailed information.
Table of Contents
- What is Yieldco?
- Potential Benefits of Investing in Yieldcos
- High yield
- Dividend growth
- High Diversity
- Task Efficiency
- What Are Some Potential Yieldco Risks?
- List of Yieldcos Stocks to Buy
- 1. Brookfield Renewable Partners (BEP)
- 2. NextEra Energy Partners (NEP)
- 3. Hannon Armstrong Sustainable Infrastructure Capital (HASIC)
- 4. Atlantica Yield
- 5. TerraForm Power
- 6. TransAlta Renewables
- 7. Pattern Energy Group
- 8. NRG Yield
- 9. 8point3 Energy Partners
- 10. Saeta Yield
- 11. Green Plains Partners LP
What is Yieldco?
A Yieldco or Yield co is a company that owns operating assets that produce predictable cash flow mainly through long-term contracts. It does that by identifying and separating volatile activities that may risk investments from more stable activities of operating assets.
Yieldcoscos pay a higher percentage of their earnings in dividends to investors. These often go to parent companies with a sizable stake.
We have, so far, given a general definition of Yieldco for easy understanding. However, the term is commonly used in the energy industry, the renewable energy sector, to be specific. These companies play the same role as Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs).
Yieldcos buy completed and operate renewable energy projects such as hydropower, solar, and wind farms and manage them. They then give you, the investors, a chance to contribute to the renewable energy sector without the associated risks. You earn dividends from the stocks.
Renewable energy power plants managed and operated by Yieldcos mainly get long-term, fixed-fee power purchase agreements (PPAs) from utility companies. PPA contracts usually last between 15 and 30 years in length. That creates a stable cash flow, implying steady dividends for investors.
Takeaway: Yieldcos are public corporations founded by renewable energy companies to raise cash for project development. A good example of what Yieldco is not is M1 Finance.
Potential Benefits of Investing in Yieldcos
Why would you consider investing in Yieldcos? There are potential benefits of investing in the renewable energy sector. Yieldco is just the safest way of doing it, and the following are the benefits:
If you are looking for high-yield, low-risk stocks to invest in, consider Yieldco stocks. The need for clean energy has been on a steady rise in the past decade. This is only expected to continue into many more decades ahead, signaling a stable high yield for Yieldcos investors.
Yieldcos has experienced rapidly rising stock prices. And by design, these Yieldcos are designed to provide potential dividend growth as they continually acquire new cash flow from solar and wind farms. It is one of the stocks with the most significant dividend growth in the past financial year. And the trend is projected to continue for many years to come.
Investing in Yieldco is a sure bet. You will earn ever-increasing dividends from your stocks with the lowest risks. If you understand what it means, you will not hesitate to put your money in these stocks.
The companies generally operate fully functional renewable energy projects that have signed long-term contracts with renewable power consumers. This strategy mitigates any risks associated with construction and fluctuating prices.
Yieldcos are the best alternative source of income for investors. You no longer have to remain tied to fixed income, MLPs, REITs, and traditional equities.
Yieldcos are structured as corporations. They distribute 1099s to shareholders, unlike MLPs that do it to K-1s. Also, Yieldcos can be held in Mutual Funds, Closed-End Funds, and ETFs without being subjected to fund-level taxation.
What Are Some Potential Yieldco Risks?
Yieldcos seem like a safe stock to invest in, but it is not totally risk-free. It is affected by some factors that can potentially lower the dividends or change the outcome.
First, the parent companies can potentially subject Yieldcos to conflicts of interest. Fortunately, this risk can be quickly mitigated by forming an independent board.
Another potential risk is attributed to weather. Since most renewable energy sources are dependent on climate, any change can adversely affect the stocks. But that is highly unlikely because yid cast their nets wide. Instead of relying on hydropower, they also consider solar and wind projects.
List of Yieldcos Stocks to Buy
After understanding how Yieldcos works and the potential benefits of buying its stocks, we get to the countdown of the best stocks to consider. If you are still interested, you can invest your money in any of the following:
1. Brookfield Renewable Partners (BEP)
Brookfield Renewable is a fossil fuel-free company that operates one of the world’s largest publicly traded renewable energy platforms. It has an extensive portfolio, managing solar, wind, hydroelectricity, and storage facilities throughout North America, South America, Europe, and Asia.
Any potential Yieldcos investor can check its portfolio on Brookfield Renewable Partners LP or Brookfield Renewable Corporation. If you need Yieldcos stock to buy, you will access all the information you need about the company in the mentioned places.
Why choose to invest in Brookfield Renewables? The company is a global leader in decarbonization and constantly fights for carbon neutrality. It has well-defined ESG goals and creates long-term values for its shareholders.
Besides, Brookfield Renewable has stable cash flows and a strong financial position. Losing money by buying your stocks in this company is highly unlikely.
The company is committed to delivering 12-15% total returns and 5-9% annual distribution growth. These are all assurance of business continuity and advantage to investors.
Negotiations are underway for Brookfield Asset Management to acquire TerraForm Power and TerraForm global. If it happens, the company will double its renewable energy production capacity and increase cash flow.
Plans to acquire TerraForm Power are just one of the ways Brookfield Renewable Partners diversifies its assets, cash flow, and geographic base.
The diverse portfolio of Brookfield Renewable is publicly available to investors on Brookfield Renewable Partners and Brookfield Renewable. You can also invest through private funds to contribute to renewable power production.
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2. NextEra Energy Partners (NEP)
NextEra Energy Partners (NEP) is a partnership formed and managed by NextEra Energy, Inc. It acquires, manages, and owns renewable energy projects with long-term cash flows. The company is headquartered in Juno Beach, Florida, United States.
This company manages wind and solar projects in the United States and natural gas infrastructure assets in Pennsylvania and Texas. It has over 17GW of renewable energy capacity across North America, and wind makes 59% of its total power generation capacity. That is followed by Natural gas (19%), nuclear (13%), solar (5%), and oil (4%).
As everything stands, NextEra Energy Partners is a Yieldco stock to watch in the coming years. It has the potential to acquire additional renewable energy assets to multiply its capacity in the next few years. The company can buy its parent company’s wind and solar assets. And if that happens, it will enjoy more years of dividend growth.
NextEra Energy Partners has created a shareholder-friendly plan and expects dividends to grow by 12-15% by the end of 2023.
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3. Hannon Armstrong Sustainable Infrastructure Capital (HASIC)
Hannon Armstrong Sustainable Infrastructure Capital, Inc. was founded in 1981. The company is headquartered in Greater Baltimore-Maryland, East Coast, Southern US.
HASIC focuses on investing in climate solutions, covering energy efficiency, renewable energy, and other sustainable infrastructure markets. It also has a diverse portfolio that makes it a low-risk Yieldco stock in the market.
HASIC aims at generating investor-friendly returns from a diversified portfolio of projects characterized by long-term and predictable cash flows. These are from proven technologies that reduce greenhouse gas emissions.
This company relies on investments that take different forms. They cover equity, joint ventures, land ownership, lending, and other financial transactions.
Unlike other Yieldcos, HASIC has a more extensive market. That goes beyond just renewable energy. But for clean energy, the company invests in grid-connected renewable energy projects that use cleaner energy sources. These are mainly solar, solar-plus-storage, and onshore wind.
This high level of diversity ensures low-risk investment. That is why the company has dividend growth and attracts more investors.
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4. Atlantica Yield
Atlantica Yield is a sustainable infrastructure company with most of its businesses around renewable energy. Its clean energy portfolio is complemented with storage, efficient natural gas, and transmission infrastructure assets. The company is also interested in the water infrastructure assets to help drive sustainable development.
Atlantica Yield supports the transition to a more renewable energy world through investing and managing susceptible infrastructure. At the same time, it creates long-term value for investors and other stakeholders.
Atlantica Yield has a diversified portfolio, consisting of 39 assets with 2,044 MW of renewable energy installed generation capacity. 71% of this is solar. Its portfolio also features the following:
- 343 MW of efficient natural gas-fired power generation capacity
- 55MWt of district heating capacity
- 1,229 miles of electric transmission lines
- 17.5 M ft3 per day of water desalination
These are distributed throughout North America, South America, and Europe.
Atlantica Yield has opportunities to grow and acquire more assets in the future. Growth through optimization of the existing portfolio is also possible as there is still room for improvement. The company also has plans to invest in new developments and the acquisition of third-party assets.
See Related: Best Solar Energy Stocks to Invest in Today
5. TerraForm Power
TerraForm Power owns and operates over 4,200 megawatts of renewable energy. These include solar and wind assets located in North America and Western Europe. Like all other Yieldco stocks, TerraForm Power’s assets are under long-term contracts that yield a stable cash flow.
TerraForm Power is a lucrative Yieldco stock to buy. However, its acquisition by Brookfield Energy Partners can possibly influence your decision. However, your stocks should be safe in case the deal is finalized.
6. TransAlta Renewables
TransAlta Renewables Inc. is a Canadian-based company interested in renewable and natural gas power generation facilities and other infrastructure. Its portfolio comprises the following:
- 23 wind facilities
- 13 hydroelectric facilities
- 7 natural gas generation facilities
- 1 solar facility
- 1 natural gas pipeline
- Battery storage project.
These assets are located in Canada, the United States, and Australia. They generate a total of 2,537 megawatts of energy. See a detailed list of facilities owned and managed by TransAlta Renewables.
The objective of TransAlta Renewables is to create a stable cash flow and steady returns for investors. The investment vehicle to achieve that is an arsenal of power generation assets that are fully contracted for the long -term with creditworthy partners.
TransAlta Renewables also has the potential to acquire other assets and capitalize on any growth opportunities. But the assets to be considered in that process should meet the return expectations and come with long-term contracting opportunities.
TransAlta Renewables is also top-notch. Senior managers have extensive experience developing, owning, maintaining, and growing power generation assets in extreme conditions. That is an assurance of business continuity and should be good news to investors.
7. Pattern Energy Group
Pattern Energy Group is among the leading groups that focus on transitioning the world to renewable energy. This company was founded in 2009 and is headquartered in San Francisco, California, United States.
Pattern Energy Group develops, owns, and operates utility-scale wind and solar power facilities in different countries. It is currently present in the United States, Canada, and Japan operating many solar and wind farms.
The company aims at sustainable development, construction, and operation of clean energy projects through trust, accountability, and transparency. It has an extensive global portfolio of 15 gigawatts but is still focused on acquiring more.
8. NRG Yield
NRG Yield was founded in 2012. It seems a new player in this industry but offers some of the best stocks that you can buy. The company has a diverse portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the United States.
NRG Yield is powered by a customer-focus strategy, strong balance sheet, and comprehensive sustainability framework. It serves North American customers, including individuals, organizations, and businesses.
NRG Yield has a transformed business model with the potential to grow market share by leveraging emerging and ongoing trends. It also focuses on future power, which begins with customers.
You can consider NRG Yield a potential Yieldco stock because of its predictable and strong cash flow. It is also committed to disciplined capital allocation and sustainability.
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9. 8point3 Energy Partners
8point3 Energy Partners was formed by a joint venture between First Solar and SunPower to own, operate, and buy solar energy generation projects. Its main objective is to generate capital distributions that grow sustainably.
8point3 Energy Partners achieves sustainability by acquiring premium solar assets developed by First Solar and SunPower. These assets serve commercial, industrial, utility, and residential consumers throughout the United States.
8point3 Energy Partners had initial assets of 432 MW of solar energy projects. However, the company was acquired by Capital Dynamics.
Capital Dynamics is an independent, global asset manager that invests in clean energy infrastructure and private equity and credit. It is client-oriented and offers tailor-made investment solutions. The company currently has assets worth billions under its arsenals.
So, investing in 8point3 Energy Partners is worth it because your money will be safe and still contribute to the renewable energy sector.
See Related: Best Green Companies
10. Saeta Yield
Saeta Yield was founded in 2009 in Madrid, Spain. It manages a portfolio of renewable energy. It currently owns assets in Spain and Portugal that generate capital.
Saeta Yield portfolio comprises 1,080 megawatts of renewable energy generation installed capacity. In Spain alone, the company manages 16 wind farms with a combined power of 539 megawatts. It also has 9 solar generating stations and 7 solar thermal plants.
All of Saeta Yield’s assets operate under a long-term revenues scheme. It is either a power purchase agreement or stable regulation. These ensure steady cash flows.
Saeta Yield focuses on investing in energy infrastructure assets that generate very stable and predictable cash flows. These are, additionally, backed by regulated and contracted income.
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11. Green Plains Partners LP
Green Plains Partners LP wraps our list of the best Yieldco stocks. If you don’t mind that this company trades fossil fuels, it can be an option.
Green Plains Partners LP is a limited partnership company formed by Green Plains Inc. It offers ethanol and fuel storage, terminal, and transportation services. The company owns, operates, develops, and acquires ethanol and fuel storage tanks, terminals, and transportation assets.
Green Plains Partners LP aims at utilizing any opportunity to grow organically or through the acquisition of complementary projects and assets from third parties.
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Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.
Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.
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