1 High-Yield Stock for Income Investors
When you see the name 8Point3 Energy Partners LP (NASDAQ:CAFD), you might not know exactly what it does. Here’s a little hint: it takes approximately 8.3 minutes for light from the sun to reach Earth.
Yep, it’s a solar stock.
Now, I know what you’re wondering: “The solar industry is not exactly known for its ability to provide an income stream. What on Earth is Income Investors doing talking about a solar stock?”
Well, while it’s true that many solar stocks don’t pay dividends at all, 8Point3 Energy Partners is not one of them. Returning cash to shareholders through regular distributions has been a focus of the partnership since its founding in 2015.
Here’s an interesting fact: when 8Point3 Energy Partners completed its initial public offering (IPO) in June 2015, it chose to trade under the ticker symbol “CAFD,” which stands for “cash available for distribution.”
And the partnership wasn’t just doing the talking. Since 8Point3 Energy went public in June 2015, it has raised its dividend every single quarter. From its first non-prorated quarterly distribution of $0.2097 per unit (prorated amount for the shortened post-IPO first quarter was $0.157 per share) to the current rate of $0.2721 per unit, CAFD’s payout has grown by nearly 30%. (Source: “8point3 Energy Partners LP Dividend Date & History,” Nasdaq, last accessed October 3, 2017.)
Usually, when a company has such an impressive dividend increase streak, investors rush towards it and bid up its share price, lowering the yield. But that’s not really the case here. Despite giving investors a pay raise every three months since its IPO, 8Point3 Energy stock hasn’t been a hot commodity, which means that investors who purchase CAFD shares today can still lock in a handsome yield.
Indeed, trading at $14.76 apiece, CAFD stock offers an annual dividend yield of 7.3%. To give you some perspective, the average S&P 500 company yields less than two percent at the moment.
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High Dividends Backed by a Rock-Solid Business
Of course, as an income investor, you know it’s not a good idea to buy the first high-yield stock you see. In order for a company to be worth considering, it needs to have a business model that’s capable of generating recurring cash flows.
The good news is, that’s exactly what 8Point3 Energy has. Although it is a solar stock, the partnership does not actually build any solar farms. Rather, the company was created by First Solar, Inc. (NASDAQ:FSLR) and SunPower Corporation (NASDAQ:SPWR) to own, operate, and acquire solar energy generation projects.
With two renewable energy heavyweights as its sponsors, 8Point3 Energy started with high-quality assets. Its initial portfolio consists of interests in 432 megawatts of solar energy projects, most of which are utility-scale. This allows the partnership to generate long-term contracted cash flows and return some of that cash to investors in the form of dividends.
This solar stock is also backed by a solid growth platform. Thanks to drop-down acquisitions, 8Point3 Energy’s portfolio now includes 945 megawatts of power generation assets. The partnership is on track to deliver annual cash available for distribution of $100.0 million in 2017. (Source: “8point3 Energy Partners Reports Second Quarter 2017 Results,” 8Point3 Energy Partners LP, June 29, 2017.)
Not all renewable energy stocks are worth owning, but, for income investors of this high-yield stock, the best could be yet to come.