Income Investments

Investors did not like Hannon Armstrong's (NYSE:HASI) fourth quarter earnings announcement last night.  While core earnings were a little weaker than expected, that is not what has the stock trading down 11% today.  What shocked investors is the fact that the company did not raise the dividend this year for the first time since the REIT went public, and it gave 3 year guidance which likely disappointed many investors. Last month, I wrote, I expect that Hannon Armstrong will continue to be a well run and conservative business in 2018, and that management will raise the dividend at the lower end...

by Sean Kidney Tesla issues $600m, 5yr EV convertible bond Tesla Motors’ inaugural bond issue has been, as you’d expect, electrifying (just had to say that). The US electric sports car manufacturer has just issued a 5 year, $600m convertible bond in a fundraising program which has seen it raise approximately $1bn through shares and convertible bonds. Coupon is 1.5-2%; conversion premium is 35%; bookrunners were JPMorgan, Goldman Sachs, Morgan Stanley. Tesla had planned to raise $450m through convertible bonds, but this was raised to $600m after strong demand from investors. That demand allowed Tesla to drop what was going to be a 2-2.5% coupon down to...

Tom Konrad CFA Jeffrey Eckel Jeffrey Eckel has an investor relations problem. No, there has not been any scandal involving fudging the books or sweatshop labor.  Rather, most investors simply don’t seem to “get” his company. His company recently went public as a REIT, or Real Estate Investment Trust, and the traditional REIT investor likes the familiar.  They invest for income, and for many, a track record of past income and dividends is a must.  While Eckel’s company manages $1.8 billion of securitized energy efficient and sustainable infrastructure...

The Yieldco model is not broken. But investor expectations have changed. by Tom Konrad Ph.D., CFA The Yieldco bubble popped almost exactly a year ago after a virtuous cycle turned vicious. Last May, I explained how these public companies (which own solar farms, wind farms and similar assets) could grow their dividends at double-digit rates despite no internal growth or retained earnings. This “weird trick” can work so long as the Yieldco’s stock price is rising, allowing it to sell stock at higher valuations and increase the amount of money invested per share. As long...

Tom Konrad CFA In the first article of this survey of yield cos, I looked at the possible reasons for the seemingly endless enthusiasm for US-listed clean energy yield cos.  Here, I'll take a look at how these yield cos are constructed, and why investors should prefer one structure over another. Who's Your Daddy? Most yield cos have been created by clean energy project developers in order to create a ready, low-cost buyer for those projects.  With the recent string of very successful IPOs, the capital available for such projects may prove...

by the Climate Bonds Team A record year with green bond issuance of USD 81bn, up 92% on 2015 figures The Trends A maturing of the green bonds market, diversification across issuers, products and use of proceeds are the main trends identified in our Green Bonds Highlights 2016 summary. The Big Numbers 92% – growth on 2015 making 2016 the most prolific year to date USD 11.8bn – November issuance, the largest month on record 24 – number of countries with green bond issuers 27% – proportion of Chinese issuers 241 – number of labelled green bonds issued (median size USD133.7m) >90 – number of new issuers >50 – number...

by Tom Konrad CFA Clean-energy stocks’ performance over the last couple of years proves that it’s possible to do well – sometimes very well – while doing good. Unfortunately, it’s also possible to lose a lot of money. Case in point: solar installer SolarCity’s stock (SCTY) price has more than quintupled since its 2012 IPO, but has fallen 40% since the start of the year. Swings like these are just too wild for many investors to stomach. So the news that California-based SolarCity launched the first public offering of solar bonds last week likely piqued the interest of sustainability-minded...

Tom Konrad The 5.7 MW Solar Farm in Salisbury, MA is the largest solar farm in New England. The land under if was purchased by Power REIT (NYSE:PW) in December. Photo source: Power REIT I first wrote about Power REIT’s (NYSE:PW) plans to invest in renewable energy real estate in May 2012.  The intent was to buy the real estate underlying a solar, wind, or other renewable energy project, charging the project owners rent.  This can be done profitably because REITs often have a lower cost of capital...

Tom Konrad CFA If you want to green your portfolio, but the wild swings of First Solar (NASD:FSLR), Tesla (NASD:TSLA), SolarCity (NASD:SCTY), and even clean energy ETFs like Powershares Wilderhill Clean Energy (NYSE:PBW) are a bit too much to let you sleep at night, you’re not alone. A reader recently suggested I write about more green stocks like Waste Management (NYSE:WM), which readers can own and not worry about too much.  I thought it was an excellent suggestion; I’ve recently been writing much more about much more exciting or terrifying stocks, because there is simply a lot more...

by Corporate Bonder The global bond market is huge. Data from the Bank for International Settlements shows that the total size of the global debt securities market (domestic and international securities) was $99.5 trillion as at June 2011, of which $89.9 trillion were notes and bonds. Governments accounted for $43.7 trillion of outstanding debt securities, financial organizations $43.8 trillion, corporations $11.0 trillion and international organizations $1.0 trillion. Against that, Bloomberg has estimated that there are $230bn outstanding of fixed-interest securities that meet their “green bonds” definition. And of course the IEA talks of $1 trillion of investment a...

Power REIT's preferred stock offerning (NYSE:PW-PRA) is an excellent hedge for the legal risks borne by the holders of its common stock (NYSE:PW.)

Tom Konrad CFA The Perfect Stock My ideal stock is: Green (in that the company is helping to make the economy more sustainable) Pays a good dividend (in the current low-interest rate environment, I consider 4% to be “good”) Has earnings and free cash flow large enough to easily sustain the dividend, and Has low debt, leading to low earnings and cash flow volatility. I like such stocks because I can buy them, and pretty much ignore them.  This leaves me time to research more speculative green stocks, while still knowing that much of my portfolio is producing...

by Tom Konrad, Ph.D., CFA It's been a busy several days in the YieldCo space. On February 5, 8point3 Energy Partners (NASD:CAFD) announced an agreement to be acquired by an infrastructure investment fund managed by Capital Dynamics. While I was still writing an article on why the sale price was at a virtually unheard of discount relative to the stock market price, two more YieldCo deals were announced: NRG Energy (NYSE:NRG) agreed to sell its sponsorship stake in NRG Yield (NYSE:NYLD and NYSE:NYLD/A) to Global Infrastructure Partners, and YieldCo TerraForm Power (NASD:TERP) made an offer to buy out Spanish YieldCo Saeta Yield (Madrid:SAY) at a 20 percent...

Tom Konrad CFA Compared to the peak of the Yieldco bubble in May, many Yieldcos have dropped by more than half, and most by more than a third. Some of this decline is because rapid dividend growth depends on an endless supply of cheap investor capital which is another way of saying that we can have rapid dividend growth or high dividend yields, but not both.  Part of the decline was due to the realization that many Yeildcos (most notably Terraform Power (TERP), Terraform Global (GLBL), and Abengoa Yield (ABY)) were not immune to...

It’s now possible to invest in green stocks for income, not just for growth. Here are three picks for 2014 from green investing professionals.