I’m trying something different and doing quick updates on individual stocks in my 10 Clean Energy Stocks model portfolio as I have time to write.  The portfolio as a whole has been accelerating with the instant torque of an electric vehicle this year (details here.)  I thought I’d start with the company that’s newest to my readers,

Valeo SA (FR.PA, VLEEF)
12/31/18 Price: €25.21/$28.20.  Annual Dividend: €1.25. Expected 2019 dividend: €1.25.  03/4/19 price: €29.13/$33.00.  YTD gain: 15.5% Euro/ 12.8% USD.

I added this stock to the portfolio because it has great technology and and improving market share, but weak industry growth and overoptimistic management projections in 2018 led the stock to get massively beaten down.  Despite the horrible year, the company was still profitable and paid a healthy dividend, with a respectable 5% yield compared to its beaten down stock price.

This meets the profile of one of my favorite types of stocks: a profitable growth company that got a bit ahead of itself when times were good, and with a stock that suffered deeply as a consequence when growth investors abandoned the stock.

Some of my past picks of this type are Mix Telematics (MIXT), and General Cable (BGC).  Mix was a bet that took 3 years to pay off (It was in the list in 2015, 2016, and 2017, but it is now trading well above where I first entered the stock and readers who added to their positions in 2016 and early 2017 are looking at 400% gains.  Readers who bought General Cable when I added it to the list in 2015 also had to wait almost two years, but saw it double when the company was bought out at the end of 2017.  Although the payoffs took 2-3 years in both cases, investors were being paid to wait with 4-8% dividends in the meantime.

More recently Seaspan Worldwide Preferred shares (SSW-PG in 2017) and common shares (SSW in 2018) both paid off (33% and 24% respectively) over the same years in which I picked them.  In this year’s list, Green Plains Partners (GPP) and Covanta Holding (CVA) also fit that profile.  These first entered the portfolio in 2016 and 2017, respectively.  The stock prices are down 1% over three years and up 7% over two, but they have both been reliable dividend payers the whole time.

Valeo feels like a similarly safe bet.  It could recover this year, or take a few years, before investors get interested in it again.  Meanwhile, we’re being paid 5% on our purchase price to wait as long as it takes.

Valeo announced annual 2018 results on February 21st.  They hit their much-revised guidance (an easy task since they had most recently revised it in October, when most of the year’s revenue had already been booked.  The company is projecting modest growth in 2019 based on revenue from new products.  At least some of this growth seems very likely to materialize because the company says that it is based on “the start of production on new contracts, particularly in the camera, electrical and transmission systems, and lighting segments.”  Note that this is not the signing of new contracts, but contracts which have already been finalized and only have to start production.

If the auto market weakens further, some of this new production may be pushed back, but at the price we bought the stock, we can afford to wait.  If the predicted growth materializes, we will see the stock price appreciate, leading to possible significant gains.

Also worth noting is that the company maintained its €1.25 dividend.  While this is not the dividend growth the company has had in the past, it means we are being paid to wait for the eventual dividend increase, which I expect in the next 3 years.

A note about US OTC tickers for foreign stocks

A long time reader asked what was the right US ticker (VLEEF or VLEEY) for Valeo. The answer can be complicated for foreign stocks, so I will reprint my entire response here:

I prefer VLEEF. When you buy a pink sheet stock that ends in an “F” you are buying the actual foreign share in the over the counter market. Typically a middleman will buy the stock on the foreign exchange for you and charge a small mark-up for the service. Always buy with limit orders, or it could be a large mark-up. When you buy a foreign stock that ends in a “Y” you are buying an ADR (American Depository Receipt.) This is a US security backed by shares of the foreign company which are held in trust at a bank or similar institution. The institution charges an annual fee (usually deducted from your dividends) for this service. ADRs often have greater liquidity, but I don’t think pink sheet ADRs are worth it if you can buy the actual stock. Sometimes listed ADRs, which trade on real exchanges, are worth it. For example, MIXT is an ADR, and I use it because I have not found any other way to buy Mix Telematics in the US. But OTC, I always buy “BLAHF” rather than “BLAHY”.

Disclosure: Long VLEEF, MIXT, SSW-PG, SSW.

The post Valeo February Update (Ten Clean Energy Stocks) appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Almost every major index fell in 2018.  My Ten Clean Energy Stocks model portfolio and the Green Global Equity Income Portfolio (GGEIP), the real-money portfolio that I manage were not exceptions.  Still, I’m satisfied with their performance: the model portfolio lost only 1.3 percent for the year, while GGEIP was down 2.6 percent.  That’s well ahead of most indexes, including my benchmarks YLCO (down 7.8 percent) and SDY (down 4.1%.)  These benchmarks are intended to reflect the performance of clean energy dividend stocks and general of dividend stocks, respectively.  Non-income oriented indexes such as the S&P 500 performed similarly to SDY.

Short Term Predictions

While my full year performance was satisfactory, my short term predictions from the start of December fared less well.  I said:

I continue to be very concerned about stock market valuation, and expect the correction that started last summer to continue in 2019.  However, I expect December may continue the market rebound we saw in November, so I see the coming month as one in which to opportunistically take profits and increase allocations to cash in anticipation of better buying opportunities in 2019.

That predicted continued December rally was a rout, with the model portfolio down 7.0 percent, GGEIP down 2.6 percent, YLCO down 3.6 percent, and SDY down 8.5 percent.  Ouch.  My single stock pick for the month, Green Plains Partners(GPP), performed relatively well, however, actually gaining 0.4 percent while all the other stocks in the model portfolio fell.

Ten Clean Energy Stocks for 2019

Readers looking for my current picks should consider the most recent list, which was published on January first. Updates on individual stocks can be found there as well.

10 for 2018 Performance

Five Year Performance

Over the last 5 years, the Ten Clean Energy Stocks model portfolio has outperformed its clean energy benchmark every year.  Over 5 years, $1000 invested in Ten Clean Energy Stocks would have become $1646, while $1000 invested in the benchmark would have fallen to $699.  $1000 invested in SDY would have become $1509 (although I was not using SDY as a benchmark for the whole period.)

Disclosure: Long SSW, CVA, CWEN A and C, AY, PEGI, TERP, BEP, GPP, HIFR, EVA.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: Wrap Up appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Looking forward to 2019, I’m more optimistic than I have been since the start of 2016, in the wake of the popping of the YieldCo Bubble in late 2015.

The bear market that started in late 2018 seems like it’s far from over, but I expect in early 2019 will see it enter a less chaotic phase.  After the wild declines and swings of late 2018, I expect investors will begin the new year with an eye to safety more than growth.  This means that the clean energy income stocks which are my focus should outperform riskier growth stocks.  The end of interest rate increases by the Federal Reserve should also help these stocks as fewer investors are drawn away by the increasing yields of bonds and other income instruments.

As I write on December 28th, my Ten Clean Energy Stocks for 2018 model portfolio looks like it will end the year with a small loss, but ahead of its benchmarks.  You can see its returns through December 28th in the chart below, and stay tuned for a recap sometime in the next week.

Out with the old

With stock prices down and yields up, I plan to keep seven stocks from the 2018 list for 2019.  The exceptions are (somewhat coincidentally), the two winners: InfraREIT (HIFR), Seaspan Worldwide (SSW), and Clearway Energy, Inc (NYSE: CWEN and CWEN/A).  I’m dropping InfraREIT because the company is being bought out by Oncor in a transaction expected to close sometime in the second quarter.  Seaspan is losing its slot for lack of greenery.  I always considered the owner of relatively efficient container ships to be marginally green (due to the relative efficiency of its ships compared to those of its peers), and a recent purchase of an interest in liquefied natural gas transportation makes it no longer meet my standard for a green stock.

I’m dropping Clearway mostly based on relative valuation.  The company is still attractive, but a little less so than some of the other Yieldcos which made this year’s list.  Not only does Clearway have some fossil fuel assets, it also has a large number of power purchase agreements with PG&E (PCG).  PG&E, in turn, has significant potential liability from the possible involvement of its equipment in starting some of California’s recent wildfires.  Both California’s utility regulators and legislators are working to protect PG&E from bankruptcy, but what that protection might look like has yet to be seen.   Given the large number of Yieldcos at very attractive valuations, I see no need to keep Clearway in my top ten picks.

In with the new

Valeo SA (FR.PA, VLEEF)
12/31/18 Price: €25.21/$28.20.  Annual Dividend: €1.25. Expected 2019 dividend: €1.25.  Low Target: €20.  High Target: €50.

My friend and colleague Jan Schalkwijk of JPS Global Investments brought French auto parts supplier Valeo SA. Like many auto stocks, Valeo struggled in 2018 with industry oversupply and the ongoing trade war.  This led the stock to fall by more than half, giving it what I consider a very attractive valuation.

Valeo follows the European model of paying a single annual dividend based on the previous year’s profits.  Its 2018 dividend was €1.25, which would amount to slightly more than a 5% yield based on the current stock price of €24.55.  Analysts estimate the company will earn around €3 per share in 2018, easily enough to maintain that dividend in 2019, and they still expect growth in 2019.

A 7.5 forward P/E ratio and over 5 percent dividend yield would be enough to get me to take any stock seriously, but valuation is not the only factor attracting me to the stock. The company is a leading supplier for two accelerating trends in the automotive industry: electrification and autonomous driving.

The company is a leader in 48V mild hybrid technology, which can deliver most of the fuel savings from of a full hybrid vehicle at a fraction of the cost by allowing the gas engine to turn off instead of idling while the vehicle is stopped.  Beyond the technologies of today, Valeo has developed a full 48V electric powertrain system which is 20% less expensive than the high voltage systems used in most electric vehicles today.  Although I expect a low voltage electric drivetrain will have lower performance than the typical high voltage system, and so be less attractive to car buyers, it could be extremely well suited to transportation services such as car sharing services and autonomous taxis, such as the Autonom Cab, the world’s first robo-taxi, which was presented by its French designer Navya. This all-electric, driverless vehicle relies on Valeo laser scanners, and LiDAR (light detection and ranging.)

While I find it particularly difficult to predict which carmaker is likely to pull ahead in the race to make profitable electric and autonomous vehicles, I feel more confident investing in a part supplier that works with most of them.

Welcome back, Hannon Armstrong

Hannon Armstrong (NYSE:HASI )
12/31/18 Price: $19.05.  Annual Dividend: $1.32. Expected 2019 dividend: $1.32.  Low Target: $18.  High Target: $27.
 
Last year, I dropped a long time favorite stock, Hannon Armstrong (NYSE:HASI) from the list because I felt the stock was temporarily overvalued.  The stock ended 2017 at $24.06, and, as I write on December 28th, is currently trading at $19.54.  After the company’s $1.32 annual dividend, this amounts to a 13% loss for the year, well below the average total return of the stocks that made the list.

In the current uncertain environment, I am happy to welcome this unique clean energy financier back into the list.  The company arranges financing for a broad range of sustainable infrastructure projects, from renewable energy projects like solar and wind farms, to energy efficient upgrades of buildings for performance contractors and commercial property assessed clean energy loans (c-PACE). Hannon Armstrong’s broad range of clients allows it to focus on the most profitable sectors as certain clean energy technologies go in and out of favor with other financiers, and it also has the expertise to either sell the securities it creates to long term investors like pension funds and insurers when demand is high, or to keep them on its own balance sheet when that is most profitable.

The rising interest rate environment of 2018 meant that Hannon Armstrong did more securitization than in previous years. This strategy delivers short term profits, but does little to increase long term cash flows that can support increases in the dividend.  The recent well-timed secondary offering of 5 million shares at $22.40 per share and the refinancing and extension of its secured credit facilities this month hint that the company plans to keep more of the investments it creates in 2019 on its own balance sheet.  These investments should easily allow it to achieve Hannon Armstrong to achieve its target 2 percent to 6 percent growth in core earnings per share.

The expected 2 to 6 percent core earnings growth should allow the company to raise its dividend per share by at least one cent in 2019, but I am unsure if management will choose to do so, and instead retain the capital to boost future growth.  The company previously had a policy of distributing 100% of core earnings over the course of the year, but said on its first quarter earnings call, “As we grow earnings in 2019 and 2020, we will consider growing the dividend perhaps at a lower growth rate than the growth in core earnings.”  Hence I expect a quarterly earnings increase of no more than 1 cent in each of 2019 and 2020.  A one cent increase would amount to 3% dividend per share growth per year, towards the lower end of the company’s core earnings growth guidance range.  I don’t consider a half cent or no dividend increase at all in 2019 to be out of the question, but I am confident that dividend growth will resume by 2020.

The Marriage of Two Old Friends

Innergex Renewable Energy (Toronto:INE, OTC: INGXF)
12/31/18 Price: C$12.54/$9.27.  Annual Dividend: C$0.68. Expected 2019 dividend: C$0.70.  Low Target: C$11.  High Target: C$16.

Innergex has never been in the model portfolio before, but it has often been a close runner-up.  It also acquired 10 Clean Energy Stocks veteran Alterra Power in early 2018.  Alterra was featured here in 2012, 2013, and 2014.  Like US Yieldcos, Innergex owns wind and solar farms, but also much less common run of river hydropower and geothermal assets.

Innergex also develops its own assets in house as well as acquiring them after they are operational, which is the model for most Yieldcos. While many US Yieldcos are struggling to bring down their payout ratios in order to retain some cash flow for investing, Innergex has kept its payout ratio in the 80 to 90 percent range for the last five years, making it less reliant on the whims of the capital markets to fund future growth.

Updates on Stocks Retained from 2018

Covanta Holding Corp. (NYSE:CVA)
12/31/18 Price: $13.42.  Annual Dividend: $1.00. Expected 2019 dividend: $1.00.  Low Target: $13.  High Target: $25. 

Leading waste-to-energy operator Covanta’s stock cratered in December, but only in sympathy with broader market declines.  News from Covanta was limited to the expected: breaking ground on a new waste-to-energy combined heat and power in Scotland.

I’m very enthusiastic about the value of Covanta’s stock at the start of 2019.  The company shored up its balance sheet and found a source of future funding for growth capital in its partnership with Green Investment Group, but the market has not rewarded the stock.  The 7.5 percent current yield is more reflective of a company in financial distress than a company on an (albeit slow) growth trajectory.  

Atlantica Yield, PLC (NASD:AY)
12/31/18 Price: $19.60.  Annual Dividend: $1.44(%). Expected 2018 dividend: $1.52 (%).  Low Target: $18.  High Target: $30. 

Atlantica was the former Yieldco of Spanish developer Abengoa before its bankruptcy.  Its new parent, Algonquin Power and Utilities (AQN), has gotten it back on track to growth fater a couple tough years as Atlantica dealt with the fallout from its former sponsor’s bankruptcy.  During those two years, Atlantica kept its dividend low and reduced debt to strengthen its balance sheet.  It has now reached its long term target of an 85% payout ratio, and is growing its portfolio with the recent acquisition of a wind farm in Uruguay.

The location of the recent acquisition in Uruguay is not an aberration.  .Atlantica has one of the most geographically diverse portfolios of all Yieldcos, a legacy of its former Spanish sponsor.  It has assets not only in the US and Spain, but also in several other countries in South and Central America and Africa.   It also adds diversification with significant electrical transmission and water infrastructure.

Pattern Energy Group (NASD:PEGI)

12/31/18 Price: $18.62.  Annual Dividend: $1.688(%). Expected 2018 dividend: $1.688(%).  Low Target: $18.  High Target: $30. 

Wind energy Yieldco Pattern’s stock price continues to trade as if investors expect a dividend cut.  I am not one of those investors, and I am happy to collect the current over 9 percent yield while management continues the slow improvement of cash flow that began in 2018 to bring its payout ratio down to its target payout ratio of 80%.  I expect the payout ratio to decline only slowly, and likely end 2019 near 90 percent.

A dividend increase this year is extremely unlikely, but the yield plus any capital gains as investors gain confidence in the stability of the current dividend will be more than adequate reward for holding the stock.

Terraform Power (NASD: TERP)
12/31/18 Price: $11.22.  Annual Dividend: $0.56 Expected 2018 dividend: $0.60 (%)  Low Target: $10.  High Target: $16. 

Compared to other Yieldcos, Terraform’s stock was fairly resilient in 2018, meaning that it is less of a bargain than several others in this list. Solely on the basis of valuation, I was torn between Terraform and Clearway.  While Clearway is trading at a higher yield and both stocks are on similar dividend growth trajectories, Clearway has more underlying risks that compensate for its higher yield (see above.)  I chose to retain Terraform in the list out of environmental preference..  I have never been completely comfortable with Clearway’s fossil fuel assets.

Brookfield Renewable Partners, LP (NYSE:BEP)
12/31/18 Price: $25.90.  Annual Dividend: $1.96 (%). Expected 2018 dividend: $2.08(%).  Low Target: $27.  High Target: $40. 

The end of 2018 brings the chance to buy what I consider the highest quality Yieldco at a greatly reduced price. Brookfield stands out from other Yieldcos because of its larger size ($8 billion market cap, compared to $3 billion for the next largest, Clearway) which allows it access to low cost debt financing.  Its sponsor, Brookfield Asset Management (BAM), which is also Terrafom’s sponsor, also gives it access to flexible financing which has historically allowed it to purchase distressed renewable energy assets at very attractive prices. BAM’s position as a manager of a broad range of leading infrastructure funds like BEP and TERP means that it takes the long view, and its Yieldcos pursue acquisitions when valuations are good rather than getting into bidding wars with other acquirers in the pursuit of growth at any cost.

Brookfield’s managers seem to agree that the partnership became significantly undervaued at the end of 2018.  Over the last year, BEP repurchased 1.8 million units on the open market at an average price of $27.72 per share.  In contrast, the partnership did not purchase any of its units over the course of 2017, when the share price traded consistently above $30.  In fact, it sold 8.3 million units at C$42.15 (US$32.45) each in a secondary offering that year.

One rule of thumb I follow with Yieldcos is that you are likely getting a good value if you can buy the shares at a price below the most recent secondary offering.

Green Plains Partners, LP (NASD: GPP)
12/31/18 Price: $.  Annual Dividend: $1.90(%). Expected 2018 dividend: $1.90(%).  Low Target: $13.  High Target: $27. 

Ethanol MLP and Yieldco Green Plains Partners remains the riskiest stock in the model portfolio.  The ethanol market is suffering from the Trump EPA’s continued undermining of the Renewable Fuel Standard with “hardship” waivers to large, highly profitable refiners.  The price of ethanol’s main competitor, gasoline is low.  Retaliatory tariffs on ethanol exports further undermine the market.

GPP’s stock price reflects this distress.  GPP’s parent, Green Plains Inc. (GPRE) has  fallen as well, and racked up significant losses this year. Nevertheless, analysts expect GPRE’s red ink to stop in 2019.  That means that investors can be confident the minimum revenue guarantees that GPRE has given GPP remain safe.  Those guarantees should allow GPP to limp along, maintaining its current dividend through the weak ethanol market.

When the ethanol market recovers, the pressure on GPP’s stock price should ease, leading to capital gains for investors who buy at the current price.  The ethanol market is in such dire straits that a recovery could be triggered by a number of factors: rising gasoline prices, falling corn prices (perhaps as a result of the continued trade war), a change EPA policy (something advocated by powerful Republicans in the Senate), or the closure of excess ethanol facilities (a process which has already begun.)

While Green Plains Partners is undeniably a risky stock, the current 14 percent dividend is extremely attractive and any recovery in the ethanol market, if it happens, should lead to a dramatic gain in the stock price.

Enviva Partners, LP. (NYSE:EVA)
12/31/18 Price: $27.75.  Annual Dividend: $2.54. Expected 2018 dividend: $2.58.  Low Target: $24.  High Target: $40. 

Wood pellet Yieldco and Master Limited Partnership Enviva continued its growth through regular drop-down acquisition from its sponsor through 2018, increasing its distribution by a regular 0.5 cents per quarter.  With a payout  ratio in the high 80 percentile range and a new, lower interest rate credit facility in place, I expect this growth to continue unabated in 2018.

At a 9 percent yield with continued growth of at least three percent per year, the partnership seems likely to produce a solid return while providing good technology diversification.

Final Thoughts

During bear markets, most investors reassess their willingness to take risk.  Some sell all their stocks, while others reallocate their investments to less risky stocks.  These ten stocks are chosen to benefit from the latter trend.  For the most part, they produce steady income streams that are largely independent of economic conditions.

The first stage of the bear market, which we experienced in late 2018, has been mostly composed of indiscriminate selling by investors once again reawakening to the fact that stocks do not always go up.  I expect the next stages to be characterized by more discriminate selling, and investors begin to differentiate between stocks that may not do as well in a slowing economy crippled by political uncertainty and trade wars, while holding on to those investments that are less dependent on economic conditions.

The final stage of a bear market is capitulation.  In this stage, the optimistic investors who had been holding on to their losers in the hope that the bear market was just a temporary dip give up.  The only buyers at that point are deep value investors, who buy based solely on the future cash flows of a company, regardless of any hope of future appreciation.  Those deep value investors will put a floor under the stock prices of these ten stocks.

I could also be wrong about the future course of this market.  Although it seems unlikely to me, I have a history of underestimating the optimism of investors.  Perhaps the current bear market will be short-lived, and the Dow will be hitting new highs by the end of 2019.  If that happens, I expect that this model portfolio will produce gains as well, although it will likely lag the gains seen by the broad market of less conservative picks.

If this model portfolio makes modest gains in a mild bear market, makes less than spectacular gains in a recovery, or takes modest losses in a continued severe bear market, it will have accomplished my long term goal.  That goal is not taking the big loss, while staying open to the opportunity for gains.  As long as you are in the market, every now and then the stars will align, and you will make some great gains, as this model portfolio did in 2016 and 2017.  The trick is not to have all those gains disappear in the bad years.

2018 was a bad year, but it’s pretty easy to live with the model portfolio’s 1.3% loss.  A severe bear market could lead to another modest loss in 2019.  On the other hand, a recovery in the later part of the year could bring significant gains.  I’m looking forward to seeing how that wager plays out in 2019.

Disclosure: Long PEGI, CWEN/A, CVA, AY, SSW, TERP, BEP, EVA, HIFR, GPP. INGXF, HASI, VLEEF, AQN.  Tom Konrad earns consulting fees from JPS Global Investments for consulting on its Green Economy Strategy.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2019 appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

At the start of November, I abandoned my short-term bearish stance on the market, writing “I’m not confident that the correction is over, but we seem to be heading into a temporary lull, and so I’m going to abandon cash as my top pick for November.”  This turned out to be a good call, with my Ten Clean Energy Stocks model portfolio up 4.3% for the month, slightly behind its broad dividend income benchmark, SDY, which was up 4.9%.    Its clean energy income benchmark YLCO gained 1.6%, as did the private portfolio I manage, the Green Global Equity Income Portfolio (GGEIP).

For the year through November, the model portfolio is up 6.8% beating both its benchmarks at 4.9% (SDY) and -4.3% (YLCO).  GGEIP is up 2.4%, well ahead of the clean energy income benchmark, but lagging the broader universe of income stocks.

Details of the stocks’ performance are shown in the chart below.

Top Picks

Last month, I chose Green Plains Partners(GPP), Covanta Holding(CVA) and Brookfield Renewable (BEP)as my top short term picks.  GPP fell 6.6%, while CVA and BEP gained 12.7% and 6.8% respectively, for an average gain of 4.3%, slightly behind the average stock in the model portfolio.  I think Green Plains Partners is in a good position for a strong rebound in December, so that will be my sole short term pick for the month.

Stock discussion

This will be an abbreviated update, focusing only on the handful of stocks that have had significant news since the last two updates at the start of November (here and here).

Seaspan Corporation (NYSE:SSW)
12/31/17 Price: $6.75.  Annual Dividend: $0.50 (7.4%). Expected 2018 dividend: $0.50 (7.4%).  Low Target: $5.  High Target: $20.
11/30/18 Price: $9.51  YTD dividend: $0.50 (5.26%)  YTD Total Return: 49.9% 

As mentioned in November, I will be taking gains in Seaspan and dropping the stock from the list in 2019, because I no longer consider the stock to be “green” due to an investment in liquefied natural gas facilities.

Covanta Holding Corp. (NYSE:CVA)
12/31/17 Price: $16.90.  Annual Dividend: $1.00(5.9%). Expected 2018 dividend: $1.00 (5.9%).  Low Target: $15.  High Target: $25. 
11/30/18 Price: $16.56 YTD dividend:  $0.75 (4.44%)  YTD Total Return: 2.7% 

Covanta had nice gain in November, but no significant news.

Clearway Energy, Inc (NYSE: CWEN and CWEN/A)
12/31/17 Price: $18.90 / $18.85.  Annual Dividend: $1.133(6.0%). Expected 2018 dividend: $1.26(6.7%)  Low Target: $14.  High Target: $25. 
11/30/18 Price: $18.26/$18.03   YTD dividend:  $1.324 (7.25%)  YTD Total Return: 2.9% 

Clearway’s stock sold off significantly due to its large number of above current market price Power Purchase Agreements with PG&E (PCG).  PG&E is facing the threat of possible bankruptcy due to liability from its equipment possibly being the cause of several of the recent fires in Californian, including the devastating Camp Fire.  The stock recovered somewhat when California’s utilities regulator, CPUC signaled that it was committed to ensuring reliable electric service for PG&E customers (which could possibly be disrupted in a bankruptcy), even if the utility may need to be restructured.

Atlantica Yield, PLC (NASD:AY)
12/31/17 Price: $21.21.  Annual Dividend: $1.16(5.6%). Expected 2018 dividend: $1.39 (6.6%).  Low Target: $18.  High Target: $30. 
11/30/18 Price: $19.62 YTD dividend: $1.44 (7.34%)  YTD Total Return: -1.1% 

Atlantica Yield rose modestly in November along with the rest of the market.

Pattern Energy Group (NASD:PEGI)

12/31/17 Price: $21.49.  Annual Dividend: $1.688(7.9%). Expected 2018 dividend: $1.70(7.9%).  Low Target: $20.  High Target: $30. 
11/30/18 Price: $20.69 YTD dividend: $1.266 (5.89%)  YTD Total Return: 3.0% 

Yieldco Pattern Energy Group rallied strongly after third quarter earnings discussed in the last update.

Terraform Power (NASD: TERP)
12/31/17 Price: $11.96.  Annual Dividend: $0. Expected 2018 dividend: $0.72 (6.0%)  Low Target: $10.  High Target: $16. 
11/30/18 Price: $11.50 YTD dividend: $0.57 (4.77%)  YTD Total Return: -1.1% 

Yieldco Terraform Power drifted higher with the market on minimal news.

Brookfield Renewable Partners, LP (NYSE:BEP)
12/31/17 Price: $34.91.  Annual Dividend: $1.872(5.4%). Expected 2018 dividend: $2.02(5.8%).  Low Target: $28.  High Target: $45. 
11/30/18 Price: $28.62 YTD dividend: $1.96 (2.81%)  YTD Total Return: -12.6%

Brookfield Renewable Partners recovered some of its losses from earlier in the year, but not on any significant news.

Green Plains Partners, LP (NASD: GPP)
12/31/17 Price: $18.70.  Annual Dividend: $1.84(9.8%). Expected 2018 dividend: $1.90(10.2%).  Low Target: $13.  High Target: $27. 
11/30/18 Price: $13.46  YTD dividend: $1.895 (10.13%)  YTD Total Return: -19.0%

Ethanol MLP and Yieldco Green Plains Partners continue to struggle because of a weak ethanol market caused by the Trump EPA granting waivers to favored oil refiners which are undermining the biofuels market.  Retaliatory tariffs on ethanol and a weak oil market are also hurting the stock.  However, the oil market has begun to recover based on a new cooperation agreement between Russia and OPEC, and the EPA is reviewing its policy on waivers.  I continue to think it is time to buy GPP while fears about the ethanol market have the stock trading remarkably cheaply.

InfraREIT, Inc. (NYSE: HIFR)
12/31/17 Price: $18.58.  Annual Dividend: $1.00(5.4%). Expected 2018 dividend: $1.00 (5.4%).  Low Target: $16.  High Target: $30. 
11/30/18 Price: $22.90 YTD dividend: $0.50 (2.69%)  YTD Total Return: 15.2% 

Electricity transmission REIT InfraREIT traded well above the $21 offer price from Sempra Energy (SRE) owned utility Oncor, but collapsed back down to $21 on December 4th when a second possible acquirer withdrew its non-binding offer.  The Oncor acquisition remains on track.  As I wrote in November, I will be dropping HIFR from the 2019 list because of the acquisition.  I hope that some readers managed to get out at the temporarily inflated prices above $21.50. My fund has made some nice gains trading the volatility, but also had some significant potential losses when the stock was above $22.

Enviva Partners, LP. (NYSE:EVA)
12/31/17 Price: $27.65.  Annual Dividend: $2.46(8.9%). Expected 2018 dividend: $2.65 (9.6%).  Low Target: $25.  High Target: $40. 
11/30/18 Price: $32.00 YTD dividend: $1.875 (6.78%)  YTD Total Return: 23.2% 

Wood pellet Yieldco and Master Limited Partnership Enviva gave back some of its gains in November, but without any significant news after the recent earnings report.

Final Thoughts

I continue to be very concerned about stock market valuation, and expect the correction that started last summer to continue in 2019.  However, I expect December may continue the market rebound we saw in November, so I see the coming month as one in which to opportunistically take profits and increase allocations to cash in anticipation of better buying opportunities in 2019.

Preview the 2019 List

Like the last two years, I am offering paying readers a preview of my Ten Clean Energy Stocks for 2019 list. I plan to publish the final article on Tuesday January 1st. If you would like to see a draft version mailed on Sunday December 30th (a full trading day before the final publication) please PayPal $10 to me at tom at alt energy stocks dot com (no spaces) with a note that it’s for the 10 for 2019 preview. The draft will contain the full list, but may not have a complete stock discussion for each stock… I expect to be working on the final version up to publication.

Disclosure: Long PEGI, CWEN/A, CVA, AY, SSW, TERP, BEP, EVA, HIFR, GPP.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: Quick November Update appeared first on Alternative Energy Stocks.

Tom Konrad Ph.D., CFA

After a fairly brutal September and October my Ten Clean Energy Stocks model portfolio is barely hanging on to positive territory for the year (up 2.4%) as is the private portfolio I manage, the Green Global Equity Income Portfolio (GGEIP, up 0.8%).  Yet I can take comfort in superior relative performance, since my broad dividend income benchmark SDY is now down 0.1% for the year, and the clean energy income benchmark YLCO has fallen 5.8%.  All returns are total return after fees and dividends.

The strong relative performance in a weak market is most likely due to the conservative nature of my picks, and mostly positive third quarter earnings, the details of which I will discuss below.

Top Picks

At the end of September, I emphasized that my top “stock” pick was cash rather than any particular stock, saying “This month’s pick is… increasing your cash position…, but if you really want to buy a stock, try GPP, CVA, or Brookfield Renewable (BEP).” This turned out to be a good call with the model portfolio down 3.4% for the month and the benchmarks down 4.8 and 4.6%. These picks were up 0.1%, down 9.6%, and down 9.9%, so I’m glad I pointed to cash as the best investment.  I’m not confident that the correction is over, but we seem to be heading into a temporary lull, and so I’m going to abandon cash as my top pick for November.  I liked third quarter earnings at Covanta (CVA) and  even as the market sold the stock, and I continue to believe that both Green Plains Partners and Brookfield are undervalued, so I will maintain these as my top short term picks.

Stock discussion

Below I describe each of the stocks and groups of stocks in more detail.  I include with each stock “Low” and “High” Targets, which give the range of stock prices within which I expect each stock to end 2018.

Seaspan Corporation (NYSE:SSW)
12/31/17 Price: $6.75.  Annual Dividend: $0.50 (7.4%). Expected 2018 dividend: $0.50 (7.4%).  Low Target: $5.  High Target: $20.
10/31/18 Price: $8.73  YTD dividend: $0.50 (7.41%)  YTD Total Return: 37.6% 

Leading independent charter owner of container ships Seaspan reported a strong third quarter, and the stock shot up, losing the water it had taken on since its high in June.

Although I feel the company still has good potential for further gains as the recovering containership market floats all boats, it is time for me to bail on this one.  During the quarter, Seaspan agreed to make a $200 million investment in Swiber Group, including a $180 million investment in an Liquefied Natural Gas (LNG) to power project in Vietnam.  Seaspan’s green credentials were always more marginal than most of my other investments. While Seaspan’s vessels are generally more efficient than other containerships, there is some question as to if the global container shipping industry has a net positive or negative effect on the environment.

On the plus side, if we assume that a certain quantity of goods is going to be transported one way or another, container ships are clearly the most efficient way for that to happen. On the other hand, if the low cost of container shipping boosts global consumption of stuff we don’t really need, or if it enables those items to be manufactured at lower costs in locations with lax environmental standards, the industry does net harm.  Given the arguments both ways, I was willing to consider Seaspan “green” because its ships are generally best in class from an efficiency standpoint, but now that the company is directly investing in the transportation and use of fossil fuels, I feel it’s time to exit with my gains.

I will not be dumping my positions in Seaspan and its Preferred securities (SSW-PG, SSW-PD, and SSW-PH) all at once, but I will be winding them down, and the company will not be in the upcoming Ten Clean Energy Stocks for 2019 model portfolio.

Covanta Holding Corp. (NYSE:CVA)
12/31/17 Price: $16.90.  Annual Dividend: $1.00(5.9%). Expected 2018 dividend: $1.00 (5.9%).  Low Target: $15.  High Target: $25. 
10/31/18 Price: $14.69 YTD dividend:  $0.75 (4.44%)  YTD Total Return: -8.9% 

Covanta, the US leader in the construction and operation of energy from waste (EfW) plants reported third quarter earnings on October 25th.  Volumes were up based on efficient operation at most plants, and the only sour note was weakness in the power markets.  During the quarter the company acquired EfW operations in Palm Beach, Florida.  Given existing operations in Florida, the company expects that it will be able to operate the new acquisition efficiently by sharing resources with other Florida operations.

Overall, the company still expects year end results towards the upper end of its guidance range.  I’m very bullish on the stock given that the price decline this year seems completely unwarranted given the generally strengthening results.

Clearway Energy, Inc (NYSE: CWEN and CWEN/A)
12/31/17 Price: $18.90 / $18.85.  Annual Dividend: $1.133(6.0%). Expected 2018 dividend: $1.26(6.7%)  Low Target: $14.  High Target: $25. 
10/31/18 Price: $19.61/$19.42   YTD dividend:  $0.927 (4.90%)  YTD Total Return: 9.4%/8.1%% 

Yieldco Clearway Energy, Inc will report earnings on November 6th.  The stock has been flat to down since the Yieldco completed its transition to its new sponsor, Global Infrastructure Partners at the end of August.  Since that transaction, the company has extended the maturity of its debt by issuing a $600 million of new 5.75% senior notes and repurchasing a similar amount if 3.25% and 3.5% notes due in 2019 and 2020.  This increases financial flexibility, but the increased interest payments will be a drag on profitability going forward.

Investors will be looking for signs that Clearway will be able to profitably execute on its growth plans in the earnings call.

Atlantica Yield, PLC (NASD:AY)
12/31/17 Price: $21.21.  Annual Dividend: $1.16(5.6%). Expected 2018 dividend: $1.39 (6.6%).  Low Target: $18.  High Target: $30. 
10/31/18 Price: $19.61 YTD dividend: $0.97 (4.57%)  YTD Total Return: -2.9% 

Yieldco Atlantica Yield reported third quarter earnings on November 5th as this article was being written.  The company announced a quarterly dividend increase to $0.36, up from $0.34 from the previous quarter and $0.29 from the prior year.  Atlantica has an 80% target payout ratio, and this dividend puts it near that target on an annualized basis. Future dividend increases are likely to continue, but only as the Yieldco grows through acquisition.  Recent increases have been based on recovery from when the dividend was cut during Atlantica’s former sponsor Abengoa’s (ABG.MC, ABGOF) bankruptcy, more than on the growth of the business.

Further dividend increases will likely track the growth of Atlanitica’s business, but that growth has resumed now that Atlantica is once again investing in new opportunities and paying down debt.  The low payout ratio over the last two years has allowed Atlantica to significantly reduce debt, and that financial flexibility is now enabling investments in additional assets.  The Yieldco announced $245 million in equity investments which should add a little over $0.03 per share to Cash Available For Distribution (CAFD) annually.  If 80% of that is paid out in dividends, those investments alone will allow for another quarter.

Atlantica’s relatively low debt compared to its peers may allow it’s recent rapid dividend increases to continue for several quarters, but even at the slowed 10% to 20% annual growth rate I expect, the current annual yield of over 7% is quite attractive.

Pattern Energy Group (NASD:PEGI)

12/31/17 Price: $21.49.  Annual Dividend: $1.688(7.9%). Expected 2018 dividend: $1.70(7.9%).  Low Target: $20.  High Target: $30. 
10/31/18 Price: $17.94 YTD dividend: $1.266 (5.89%)  YTD Total Return: -10.7% 

Yieldco Pattern Energy Group announced third quarter results on November 4th, so the market reaction is not included in the numbers above.  Investors loved that sales and cash from operations were both up strongly, and that the company reaffirmed its guidance.  Investors had been worried (needlessly, in my opinion) that the company might need to cut its dividend to achieve its target payout ratio of 80%.  This quarter seems likely to put most of those fears to rest.

The company is avoiding raising new capital at its current depressed share price, but is still able to make new investments by selling non-core, difficult to service wind farms like its Chilean operations and reinvesting in wind farms within its current footprint.  These include a acquiring a 51% stake in a Quebec wind farm, and a plan to repower (replace the turbines) on its Gulf Wind project while it can take advantage of the US Production Tax Credit.

Brookfield Renewable Partners, LP (NYSE:BEP)
12/31/17 Price: $34.91.  Annual Dividend: $1.872(5.4%). Expected 2018 dividend: $2.02(5.8%).  Low Target: $28.  High Target: $45. 
10/31/18 Price: $27.25 YTD dividend: $1.47 (4.21%)  YTD Total Return: -18.2%

Brookfield Renewable Partners reported 3rd quarter earnings on October 31st.  Like Pattern, Brookfield is strategically selling assets to raise money for growth opportunities and to strengthen its balance sheet despites rising interest rates and a weak share price.  In Brookfield’s case, it is selling 50% of its state in a portfolio of contracted Canadian hydropower assets.  The company will retain the management of the entire portfolio, along with associated fees, allowing it to earn a slightly higher return per dollar invested in the portfolio.

The company continues to develop a number of small hydro and wind projects in Europe, Brazil, and the US.  Projects expected to come on line in the 4th quarter can be expected to increase funds from operations by approximately 3% on an annual basis.  The company has a target per-share annual dividend increase of 5% to 9%, which I expect to be announced in conjunction with the fourth quarter dividend in December or January.

Green Plains Partners, LP (NASD: GPP)
12/31/17 Price: $18.70.  Annual Dividend: $1.84(9.8%). Expected 2018 dividend: $1.90(10.2%).  Low Target: $13.  High Target: $27. 
10/31/18 Price: $14.92  YTD dividend: $1.42 (7.59%)  YTD Total Return: -13.3%

Ethanol MLP and Yieldco Green Plains Partners will report thierd quarter results on November 11th. The stock has been selling off for most of the year in large part due to the Trump EPA’s attacks on the ethanol industry.  While Trump also announced a long-planned move to allow the sale of 15% ethanol blended into gasoline (E15) year round, this move is insignificant compared to the Trump EPA’s continued undermining of the Renewable Fuel Standard mandate that oil refiners blend a certain amount of ethanol into the gasoline they produce.  Effectively, the Trump administration is permitting a slight increase in ethanol sales while greatly reducing the level of mandated ethanol sales.

Slowly rising gas prices and falling corn prices will at some point lead to a revival of the ethanol industry, as ethanol becomes cheaper to produce than the gasoline it displaces, even without support from the EPA.  Until then, Green Plains Partners has minimum revenue guarantees from its parent, Green Plains (GPRE) which I believe will sustain it and keep the company from having to cut its dividend until that revival materializes.  For that reason, I think GPP’s low stock price represents an excellent buying opportunity despite the currently weak ethanol market.

InfraREIT, Inc. (NYSE: HIFR)
12/31/17 Price: $18.58.  Annual Dividend: $1.00(5.4%). Expected 2018 dividend: $1.00 (5.4%).  Low Target: $16.  High Target: $30. 
10/31/18 Price: $21.02 YTD dividend: $0.75 (4.0%)  YTD Total Return: 17.2% 

Electricity transmission REIT InfraREIT agreed to be acquired by private utility Oncor for $21 a share. The deal is expected to close by mid-2019, until which time the company will continue to pay its $0.25 per share annual dividend, including a pro-rated dividend for any partial quarter prior to closing.

I expect the stock price to remain very stable around $21 until the deal closes.  Investors who consider the low-risk 4.76% yield to be attractive should hold until the deal closes, while other investors can sell as the need for cash arises.

Enviva Partners, LP. (NYSE:EVA)
12/31/17 Price: $27.65.  Annual Dividend: $2.46(8.9%). Expected 2018 dividend: $2.65 (9.6%).  Low Target: $25.  High Target: $40. 
10/31/18 Price: $30.02 YTD dividend: $1.875 (6.78%)  YTD Total Return: 15.6% 

Wood pellet Yieldco and Master Limited Partnership Enviva will report third quarter earnings on November 9th.  Since its strong second quarter earnings, the partnership has announced an increased distribution of $0.635 payable in November, announced long term contracts for the sale of wood pellets with three Japanese customers.  Two of those contracts have been subsequently finalized. Given the business progress slow downward drift of the stock since second quarter earnings were announced, I’m optimistic that third quarter earnings will give the stock a boost.

Final Thoughts

The results of Tuesday’s election are likely to cause more volatility in the stock market no matter what happens, but I feel that we have reached at least a short term pause in the market correction that started in September.  Over the medium term, I feel it pays to be cautious and keep a healthy allocation to cash, but in the short term, market volatility has lead and will to some good valuations in quality dividend paying clean energy stocks.

As a side note.  I picked CVA, GPP, and BEP as my top picks for the month, but that’s only because I’m not cheating and basing those picks on the strong earnings reports from PEGI and AY after the end of the month before I got this out.

Disclosure: Long PEGI, NYLD/A, CVA, AY, SSW, SSW-PRG, SSW-PRD, SSW-PRH, TERP, BEP, EVA, HIFR, GPP, AQN.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: Third Quarter Earnings appeared first on Alternative Energy Stocks.

As you can see from the chart, September was a tough month for my model portfolio of Ten Clean Energy Stocks for 2018.  Seaspan (SSW) fell back on trade war fears and Green Plains Partners (GPP) fell on ethanol market weakness caused by retaliatory ethanol tariffs and the Trump EPA’s continued undermining of the Renewable Fuel Standard.  I’m less sure why Covanta (CVA) is down, but Clearway Energy’s (CWEN and CWEN-A formerly NRG Yield) small decline is due to a recent secondary offering.

Two of these (CVA and GPP) were my top picks last month, while the third was Terraform Power (TERP).  With the declines of GPP and CVA, I like both stocks more, so they are still my favorites.  Like last month, I’m still very concerned about the market and I like cash better still.  Indeed, last month my cash holdings easily out-performed my three top picks (-1.7%) and the portfolio as a whole (-1.6%.)  This month’s pick is the same: increasing your cash position seems like a good idea, but if you really want to buy a stock, try GPP, CVA, or Brookfield Renewable (BEP).

I’ll be back with a more in-depth update next month.

Disclosure: Long PEGI, AY, CWEN-A, CVA, HIFR, AY, SSW, TERP, BEP, EVA, GPP.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: September Quick Update appeared first on Alternative Energy Stocks.

Tom Konrad Ph.D., CFA

July and August saw some mild recovery for the stock market after a difficult first half of 2018.  Clean energy income stocks continue to lag the broader market, but my Ten Clean Energy Stocks model portfolio has managed to maintain its lead over its broad market benchmark.

Through August 31st, the model portfolio is up 7.5%, compared to its broad dividend income benchmark SDY, which is up 5.3%.  Its clean energy income benchmark YLCO is down 1.2, even after dividend income.  The private portfolio I manage, the Green Global Equity Income Portfolio (GGEIP), is slightly behind the broad market of income stocks at 4.6%, but well ahead of YLCO.

Over the two months, most of these companies announced their second quarter earnings, and for most of them, there were few surprises, which no doubt contributed to the steady performance of most of the portfolio.

Details of the stocks’ performance are shown in the chart below.

Top Picks

In July, I highlighted Brookfield (BEP), Covanta (CVA) and Atlantica (AY) as my top short term picks.  These three stocks were up 2.4%, 7.1%, and 3.9% over the last two months. This average increase of 4.5% was solidly above the portfolio as a whole at 2.3%.  I currently think  CVA, GPP and TERP have the best prospects for short term gains.  Not that these prospects are great; I am taking an increasingly cautious approach towards the market as a whole and increasing my allocation to cash.

Stock discussion

Below I describe each of the stocks and groups of stocks in more detail.  I include with each stock “Low” and “High” Targets, which give the range of stock prices within which I expect each stock to end 2018.

Seaspan Corporation (NYSE:SSW)
12/31/17 Price: $6.75.  Annual Dividend: $0.50 (7.4%). Expected 2018 dividend: $0.50 (7.4%).  Low Target: $5.  High Target: $20.
8/31/18 Price: $9.22  YTD dividend: $0.375 (5.56%)  YTD Total Return: 43.3% 

Leading independent charter owner of container ships Seaspan’s gave back a little of its gains from earlier in the year.  The second quarter earnings call was “steady as she goes,” so I see the decline as mostly profit taking after the earlier large gains.  I took some gains myself.

Covanta Holding Corp. (NYSE:CVA)
12/31/17 Price: $16.90.  Annual Dividend: $1.00(5.9%). Expected 2018 dividend: $1.00 (5.9%).  Low Target: $15.  High Target: $25. 
8/31/18 Price: $17.65 YTD dividend:  $0.50 (2.96%)  YTD Total Return: 7.8% 

Covanta, the US leader in the construction and operation of energy from waste (EfW) plants reported second quarter earnings in July. The company is seeing improvements in profitability in most parts of its operations, and now expects full year results to come in at the high end of its previous guidance.

In August, the company reported several financial transactions that should improve overall profitability.  It sold  a small (13MW) hydroelectric project in Washington state to Atlantic Power (AT), and assumed the operation and maintenance of two EfW facilities in Florida.  Since Covanta already operates six other EfW facilities in Florida, it should be able to achieve synergies in these operations that were not possible for the hydroelectric plant in Washington.

The company also enlarged and lengthened the term of its senior loans, and refinanced a number of tax exempt bonds leading to a reduction in interest expense.  Given the company’s size, the move is likely to only result in a $0.01 per share improvement in annual earnings, but every improvement is good to see.

Clearway Energy, Inc (NYSE: NYLD and NYLD/A)
12/31/17 Price: $18.90 / $18.85.  Annual Dividend: $1.133(6.0%). Expected 2018 dividend: $1.26(6.7%)  Low Target: $14.  High Target: $25. 
8/31/18 Price: $18.50/$18.44   YTD dividend:  $0.927 (4.90%)  YTD Total Return: 10.1% 

Yieldco NRG Yield announced that Global Infrastructure Partners (GIP) had completed the purchase of NRG’ Energy’s (NRG) controlling stake in the Yieldco and had become its new sponsor.  NRG Yield has changed its name to  Clearway Energy, Inc, and will be holding a conference call to discuss its plans for the future on September 11th.  GIP is also acquiring NRG’s renewable energy assets and development platform.

Clearway’s stock has been advancing since the announcement, most likely in anticipation of renewed growth under its new sponsor.

Atlantica Yield, PLC (NASD:AY)
12/31/17 Price: $21.21.  Annual Dividend: $1.16(5.6%). Expected 2018 dividend: $1.39 (6.6%).  Low Target: $18.  High Target: $30. 
8/31/18 Price: $20.64 YTD dividend: $0.97 (4.57%)  YTD Total Return: 2.2% 

Atlantica Yield’s new sponsor, Algonquin Power (AQN) has been in place since early this year, and the Yieldco has been taking advantage of the stronger sponsor to refinance its debt at lower interest rates while continuing to pay down existing debt with retained cash flow.  The aftermath of Atlantica’s former sponsor Abengoa’s (ABG.MC, ABGOY, ABGOF) bankruptcy led to Atlantica focusing on paying down debt rather than growth for the last two years, but now that looks ready to change.  The company states that it is in discussions for the acquisition of $200 million in equity worth of accretive investments.

That would represent an approximate 10% increase in the company’s size if all the deals were consummated.  If we assume cash flow margins  20% to 30% above returns to current equity, we could see cash flow per share growth of 2 to 3 percent from these transactions.  I expect a return to even such modest growth will be welcomed by shareholders.

Pattern Energy Group (NASD:PEGI)

12/31/17 Price: $21.49.  Annual Dividend: $1.688(7.9%). Expected 2018 dividend: $1.70(7.9%).  Low Target: $20.  High Target: $30. 
8/31/18 Price: $20.38 YTD dividend: $0.844 (3.93%)  YTD Total Return: -0.7% 

Yieldco Pattern Energy Group’s stock is starting to recover from lows earlier this year as the company’s path to renewed dividend growth becomes clearer.  The company had been paying out nearly 100% of cash flow available for distribution (CAFD) in 2017, and has a goal of bringing this nearly unsustainable payout ratio down to 80%.  To do that without a dividend cut requires growing CAFD by approximately 25% over 2017.

Strong second quarter results increased CAFD by 8% in the first half of 2018 over the same period in 2017, despite a decline in the first quarter.  8% is a far cry from the 25% needed before Pattern is likely to resume dividend increases, but it does give the company breathing room.  Combine this with the completed sale of PEGI’s Chilean assets and the acquisition of higher yielding assets in Japan and Quebec and investors seem ready to put their fears of a dividend cut to rest.

I do not expect any dividend increases for the next year or two as Pattern brings down its payout ratio towards its 80% target, but at a current yield over 8%, increases are not necessary to make the stock an attractive investment.

Terraform Power (NASD: TERP)
12/31/17 Price: $11.96.  Annual Dividend: $0. Expected 2018 dividend: $0.72 (6.0%)  Low Target: $10.  High Target: $16. 
8/31/18 Price: $11.18 YTD dividend: $0.38 (3.18%)  YTD Total Return: -3.4% 

Yieldco Terraform Power completed its acquisition of European Yieldco Saeta Yield, and is now turning its focus on improving the operations at its fleet to improve profitability.  Terraform’s former sponsor, the now bankrupt SunEdison, operated the Yieldco’s fleet of wind and solar farms.  With the distraction of bankruptcy proceedings, such operations were doubtlessly neglected over the last two years.  Now, with a new operations agreement with General Electric (GE), TERP plans to invest in its existing fleet (which now includes Saeta’s as well) to improve operations.

The Yieldco says that these plans, along with the Saeta acquisition, give it a clear path to meeting its 5 percent to 8 percent dividend growth target through 2022 while maintaining its payout ratio below 85%.  Such a long term growth target is rare among Yieldcos, especially one which already has a 6.8% yield.

Brookfield Renewable Partners, LP (NYSE:BEP)
12/31/17 Price: $34.91.  Annual Dividend: $1.872(5.4%). Expected 2018 dividend: $2.02(5.8%).  Low Target: $28.  High Target: $45. 
8/31/18 Price: $30.77 YTD dividend: $0.98 (2.81%)  YTD Total Return: -9.0%

Brookfield Renewable Partners reported a weak second quarter results because of low production from hydropower.  The stock sold off as a result, and now looks quite attractive.  Brookfield’s large base of hydropower and limited partnership structure (you get a K-1 but it is safe to hold in a retirement account because it does not produce UBTI.)

In other words, BEP is a great diversifier in a Yieldco-heavy portfolio, and now looks like a good time to add it to that portfolio if you have not already.

Green Plains Partners, LP (NASD: GPP)
12/31/17 Price: $18.70.  Annual Dividend: $1.84(9.8%). Expected 2018 dividend: $1.90(10.2%).  Low Target: $13.  High Target: $27. 
8/31/18 Price: $15.20  YTD dividend: $0.945 (5.05%)  YTD Total Return: -14.3%

Ethanol MLP and Yieldco Green Plains Partners has been selling off in large part due to the Trump EPA’s attacks on the ethanol industry.  These include diluting the Renewable Fuel Standard, and granting waivers to oil refiners who don’t really need those waivers.  In other words, it is tough times for GPP and its parent GPRE.

At this point, however, I think much of the bad news is priced in, and there is some “good” news in the form of higher gas prices, as well as the tariffs that China and others are putting on corn.  This bad news for corn growers is good news for corn users, like Green Plains. China has also put a tariff on ethanol, but since ethanol can be substituted for gasoline (to a point), the price of gas should put a floor on the price of ethanol.  That is not true for the price of corn.

There are definitely risks with this stock, but the 12%+ yield is some very healthy compensation for those risks.

InfraREIT, Inc. (NYSE: HIFR)
12/31/17 Price: $18.58.  Annual Dividend: $1.00(5.4%). Expected 2018 dividend: $1.00 (5.4%).  Low Target: $16.  High Target: $30. 
8/31/18 Price: $20.89 YTD dividend: $0.50 (2.69%)  YTD Total Return: 15.2% 

Electricity transmission REIT InfraREIT reported much improved income and cash flow per share over the year earlier due to asset acquisitions.  The company is maintaining its $1 annual dividend while it re-evaluates its corporate structure.  It lost most of the advantages it gained by being a REIT as a result of the 2017 Republican tax bill.  At this point, the company could decide to become a normal corporation, be sold, or combine with another corporation.  There is also uncertainty around restructuring various long term lease transactions with its parent, Hunt Corporation so that they work with any new corporate structure and the new tax laws.

Earlier this year, the speculation about a possible go-private transaction drove the stock into the mid-$22 dollar range, at which point I wrote that I was “selling calls to lock in some profits in InfraREIT.”  Now that the stock has pulled back a bit, I’m happy to hold at the current price, collect my dividends, and see what happens.  I expect that there is more upside profit potential in a possible future transaction than downside risk, and I like the improving earnings numbers.  Finally, the company reached a beneficial tax settlement with the State of Texas, which was also good news.  With this positive backdrop, investor uncertainty about the company’s future corporate structure is likely leading to some current undervaluation.

Enviva Partners, LP. (NYSE:EVA)
12/31/17 Price: $27.65.  Annual Dividend: $2.46(8.9%). Expected 2018 dividend: $2.65 (9.6%).  Low Target: $25.  High Target: $40. 
8/31/18 Price: $32.00 YTD dividend: $1.875 (6.78%)  YTD Total Return: 23.2% 

Wood pellet Yieldco and Master Limited Partnership Enviva reported another strong quarter, with new long term contract signed for additional wood pellet supplies to both Europe and Japan.  Although the stock is up significantly this year, I am not ready to start taking profits, given its strong growth and and prospects.

Final Thoughts

While I’m happy that this model portfolio and GGEIP are both now comfortably up for the year, stock market valuation and political turmoil are making me increasingly cautious about the market going forward.  Although there are a few stocks here that I think are good values, I believe caution is increasingly warranted.  I see this as a great time to wait and see, while holding a healthy allocation in cash.

Disclosure: Long PEGI, NYLD/A, CVA, HIFR, AY, SSW, SSW-PRG, TERP, BEP, EVA, HIFR, GPP, AQN, GE.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: Second Quarter Earnings appeared first on Alternative Energy Stocks.

This is a list of renewable and alternative energy stocks with dividend or distribution yields above 4%.  The list includes most Yieldcos (high distribution companies that own renewable energy operations), but is not limited to Yieldcos. Some Yieldcos may be excluded if their yield is below 4%.

If you know of any high income (distribution yield over 4%) renewable or alternative energy stock that is not listed here, please let us know by leaving a comment. Also if you notice stocks in the list where the yield has fallen below the 4% threshold.

The post List of High Yield Alternative Energy Stocks appeared first on Alternative Energy Stocks.

The first half of 2018 has been difficult for most investors, including clean energy investors and dividend income investors. Through June, my broad dividend income benchmark SDY lost 0.6%, while my clean energy income benchmark YLCO lost 4.7%, including dividend income.

My picks were also down for most of the year, finally struggling back into positive territory at the end of May.  They finished the first half up a solid 5.9%.  The real money strategy I manage, the Green Global Equity Income Portfolio (GGEIP), also squeaked in to positive territory by 1.2% at the end of June.

Details of then stocks’ performance are shown in the chart below.

Top Picks

Last month, I highlighted Atlantica AY (at $18.91) and Terraform Power TERP (at $10.83) are my top short term picks.  These two stocks were up 7% and 8% since that writing, significantly more than the portfolio as a whole (2.8%).  I currently think Brookfield (BEP), Covanta (CVA) and Atlantica (AY) have the best prospects for short term gains.

Stock discussion

Below I describe each of the stocks and groups of stocks in more detail.  I include with each stock “Low” and “High” Targets, which give the range of stock prices within which I expect each stock to end 2018.

Seaspan Corporation (NYSE:SSW)
12/31/17 Price: $6.75.  Annual Dividend: $0.50 (7.4%). Expected 2018 dividend: $0.50 (7.4%).  Low Target: $5.  High Target: $20.
6/30/18 Price: $10.18  YTD dividend: $0.25  (3.70%)  YTD Total Return: 56.0% 

Leading independent charter owner of container ships Seaspan’s stock steamed upwards, riding the tide of the recovering container shipping industry.  While President Trump has brought us to the brink of a global trade war, so far the potential damage to the global shipping industry has been a smaller factor in investors minds than the general recovery of the industry after two very lean years caused by a supply glut.  Over the last two years, many container ships have been scrapped and few new build ships have been delivered, with the net effect of reducing oversupply and increasing charter prices.

Even if Trump’s trade war rages out of control, it will hurt, but not be a total disaster for the container ship industry. This is because this particular trade war is shaping up to be one of the US vs. everybody else variety.  Other countries will continue to trade with each other, and global shipping may even pick up some trade from Mexico and Canada that used to go between those countries and the United States by land.

Nevertheless, a trade war that is looking increasingly likely and its net effect on shipping (not to mention the US economy) will be negative.  With SSW’s stock up over 50% year to date, and the trade waters looking increasingly choppy, now seems like a good time to take some profits.

Covanta Holding Corp. (NYSE:CVA)
12/31/17 Price: $16.90.  Annual Dividend: $1.00(5.9%). Expected 2018 dividend: $1.00 (5.9%).  Low Target: $15.  High Target: $25. 
6/30/18 Price: $16.50 YTD dividend:  $0.50 (2.96%)  YTD Total Return: -10.3% 

The stock of US leader in the construction and operation of waste-to-energy plants Covanta rose in both May and June, most likely in reaction to the encouraging first quarter earnings report released on April 26th and which I covered at the start of May.

NRG Yield (NYSE: NYLD and NYLD/A)
12/31/17 Price: $18.90 / $18.85.  Annual Dividend: $1.133(6.0%). Expected 2018 dividend: $1.26(6.7%)  Low Target: $14.  High Target: $25. 
6/30/18 $17.20/$17.05 Price:  YTD dividend:  $0.607 (3.2%)  YTD Total Return: -6.1% 

Yieldco NRG Yield drifted lower in line with the broad market in May and June. The market seemed to agree with my assessment of the May 3rd first quarter results, which I described as “unsurprising” at the time.

Atlantica Yield, PLC (NASD:AY)
12/31/17 Price: $21.21.  Annual Dividend: $1.16(5.6%). Expected 2018 dividend: $1.39 (6.6%).  Low Target: $18.  High Target: $30. 
6/30/18 Price: $20.18 YTD dividend: $0.63 (2.97%)  YTD Total Return: -1.7% 

Atlantica Yield drifted down in May, but then more than recovered after reporting first quarter results on May 14th.  The company increased its quarterly dividend to $0.32 per share, and announced an 8% to 10% compound annual dividend growth target through 2022.  This target is similar to those for BEP and TERP.

The company expects to achieve the target dividend growth through a combination of strong current cash flow and capital increases.  Although it expects to use corporate debt for some acquisitions, it plans to keep its debt below 3 times equity.

Pattern Energy Group (NASD:PEGI)

12/31/17 Price: $21.49.  Annual Dividend: $1.688(7.9%). Expected 2018 dividend: $1.70(7.9%).  Low Target: $20.  High Target: $30. 
6/30/18 Price: $18.75 YTD dividend: $0.844 (3.93%)  YTD Total Return: -8.6% 

In May, I predicted that wind Yieldco Pattern Energy Group’s first quarter earnings would disappoint the market because of low winds in the first quarter, leading to a potential buying opportunity.  Although winds were low in the first quarter, the results were not as bad as I (or the market) had been expecting, leading the stock to spike briefly rather than fall.  The substance of the first quarter report contained few surprises, with management re-affirming its guidance for 14% growth in cash available for distribution, but no plans to increase its dividend.  The company hopes to use the cash flow increases to improve its payout ratio, which was pushing up towards 100% in 2017, so I do not expect any dividend increases until at least the end of 2019.

Management also discussed its plans to rationalize its holdings with the possible sale of non-core assets such as its holdings in Chile.  Sure enough, the company announced the sale of its Chilean assets (mainly its 81MW stake in the 115 MW El Arrayán Wind project on May 24th.  Because Pattern has no other assets in that part of the world, the El Arrayán project was much more expensive to manage than its other wind farms. The company expects to eliminate more than $1.0 million of annual overhead related to managing the business in Chile.  The proceeds will be used to pay down debt and invest in higher yielding projects, most likely in Japan.

Terraform Power (NASD: TERP)
12/31/17 Price: $11.96.  Annual Dividend: $0. Expected 2018 dividend: $0.72 (6.0%)  Low Target: $10.  High Target: $16. 
6/30/18 Price: $11.70 YTD dividend: $0.38 (3.18%)  YTD Total Return: 1.1% 

Yieldco Terraform Power completed its acquisition of European Yieldco Saeta Yield, financed by an equity investment from its sponsor, Brookfield Asset Management (BAM) and affiliates, including Brookfield Renewable (BEP).  It was interesting to note that when Terraform announced that the acquisition would be funded through the previously-arranged investment by Brookfield on June 5th, TERP’s stock barely budged.  A week later, Brookfield itself issued a press release titled “Brookfield Renewable Increases Ownership Stake in TerraForm Power” Terraform’s stock jumped by $1.  Apparently the large investors with enough money to move TERP’s stock spend a lot more time watching Brookfield’s news feed than Terraforms’.  This points to one advantage that small investors can have over large ones: Since our investments are smaller, we can spend our time watching small stocks closely, allowing us to get an advantage over larger investors in the stocks we choos to follow.

Brookfield Renewable Partners, LP (NYSE:BEP)
12/31/17 Price: $34.91.  Annual Dividend: $1.872(5.4%). Expected 2018 dividend: $2.02(5.8%).  Low Target: $28.  High Target: $45. 
6/30/18 Price: $30.33 YTD dividend: $0.98 (2.81%)  YTD Total Return: -11.2%

Brookfield Renewable Partners was up in May but down in June for a mostly flat 2 months.  Although one press release proved to be significant for Terraform Power, there was little to move BEP’s own stock.

Green Plains Partners, LP (NASD: GPP)
12/31/17 Price: $18.70.  Annual Dividend: $1.84(9.8%). Expected 2018 dividend: $1.90(10.2%).  Low Target: $13.  High Target: $27. 
6/30/18 Price: $17.15  YTD dividend: $0.945 (5.05%)  YTD Total Return: -3.3%

Ethanol MLP and Yieldco Green Plains Partners reported first quarter results on May 7th.  Ethanol volumes were down due to market conditions which led GPP’s parent, GPRE to process less ethanol thought GPP’s facilities.  This reduction in volume was partially offset by a small contractual payment from GPRE designed to partially make up for the lost revenue in periods of low volume.

Although GPP gave all its distributable cash flow to shareholders in the first quarter, it nevertheless increased its distribution for future quarters by half a cent to $0.475 per unit.  The partnership can likely afford this increase because results are often seasonally low in the first quarter, and rising gas prices will lead to higher volumes and improved profitability.  Further, GPP began operation an ethanol train terminal in Little Rock, AR as part of a partnership and is investing in further ethanol distribution facilities as part of this same partnership.

Although new investments, seasonal changes, and improved market conditions for ethanol should support the slightly increased dividend, I expect future dividend increases to be similarly modest for the next year or more, while the partnership works to reduce its payout ratio.  While the almost 11% current yield is quite attractive, investors should not be expecting much in the way of capital gains on top of that, especially given the Trump administration’s efforts to undermine the Renewable Fuel Standard which I discussed in May.

InfraREIT, Inc. (NYSE: HIFR)
12/31/17 Price: $18.58.  Annual Dividend: $1.00(5.4%). Expected 2018 dividend: $1.00 (5.4%).  Low Target: $16.  High Target: $30. 
6/30/18 Price: $22.17 YTD dividend: $0.50 (2.69%)  YTD Total Return: 22.2% 

Electricity transmission REIT InfraREIT added somewhat to its gains in June.  Without any significant news, I think the move may simply be a flight to safety by income investors looking for stocks without significant international exposure.

Enviva Partners, LP. (NYSE:EVA)
12/31/17 Price: $27.65.  Annual Dividend: $2.46(8.9%). Expected 2018 dividend: $2.65 (9.6%).  Low Target: $25.  High Target: $40. 
6/30/18 Price: $29.10 YTD dividend: $1.245 (4.5%)  YTD Total Return: 9.9% 

Wood pellet Yieldco and Master Limited Partnership Enviva jumped strongly in May after giving some of those gains back in June.   The company announced that its Chesapeake wood pellet export terminal returned to full operation on June 28th after a fire in the first quarter.  The partnership expects that all the related costs of the fire will be recovered from insurance and that all its contractual obligations for deliveries can be met.

Final Thoughts

With four months of recovery after a dismal January and February, my portfolios (both model and real) are back in the black for the year.  But the Trump administration’s trade blunders and efforts to undermine environmental protections and support for clean energy are increasing the risk for clean energy investors, and for the stock market as a whole.

Two months ago, I thought the timing was good to increase market exposure.  Now I feel the emphasis should be towards taking some gains and reducing overall risk.  In this model portfolio, Seaspan (SSW) is presenting a good opportunity to take gains for readers who bought early in the year.  I’m not doing much on the buy side right now, but, if I were, I’d be looking to Brookfield (BEP), Covanta (CVA) and Atlantica Yield (AY).

Disclosure: Long PEGI, NYLD/A, CVA, AY, SSW, SSW-PRG, TERP, BEP, EVA, HIFR, GPP.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: First Half Update appeared first on Alternative Energy Stocks.

Stay tuned for a full update next month, but it’s nice to be back in the black… especially with the benchmarks still struggling.  Thanks to Enviva (EVA), Covanta (CVA), and Seaspan (SSW).  Until then, here’s the May update, where I said EVA and CVA were two of my 3 top short term picks [BEP, up 4%, was the third], and I commented that “I still think Seaspan has significant room to the upside.”

AY (at $18.91) and TERP (at $10.83) are my top short term picks right now.

Disclosure: Long EVA, HIFR, GPP, BEP, TERP, PEGI, AY, NYLD, NYLD/A, CVA, SSW.

The post Ten Clean Energy Stocks Back In Positive Territory Year To Date appeared first on Alternative Energy Stocks.