NextEnergy Solar Fund (NESF) earnings visibility underpins its dividend target according to research house Marten & Co, which expects the share price to return to a premium to NAV.
The threat of windfall taxes alongside rising discount rates (used to discount NESF's future cash flows) have hit the share price, but visibility on these points is clearer while NAV is still making positive progress.
“Strong forecast earnings cover for the dividend and NESF's forward sales of power give the board confidence to maintain its policy of at least matching dividend hikes with inflation.
“If shareholders give their approval for further expansion in this area, a push into energy storage offers another route to earnings growth.”
While the discount currently is wider than its long-term average, the shares can move back to trading at a premium to NAV, argues Marten, and the fund can get back to raising fresh equity to back its extensive pipeline of revenue accretive investments.
Shares rose 1.8% to 111.2p.