Greencoat UK Wind (UKW) stands out from the peer group as the only pure play wind trust exposed solely to the UK, according to the latest research from trust specialist Kepler.
UKW has relatively simple model of investing in wind farms at attractive rates of return and using around two-thirds of cashflows to pay a dividend that rises with inflation each year.
The remaining third of annual cashflows are reinvested to preserve the capital base in real terms.
In an average year, this allows for a strong level of dividend cover, which allows manager Greencoat to run an 'un-hedged' exposure to power prices, yet still be confident of hitting the board's dividend target.
This has enabled UKW to be a significant beneficiary of the very high wholesale electricity prices currently, with excess cashflows at roughly twice the "model" rate (3p net of depreciation for the quarter).
Kepler adds the benefit is also showing through in a 5.2% NAV increase as a result of higher forward power prices (for the period 2022-2025) increasing the value of the trust's assets.
“Rising assumptions for 2022 inflation (but no further out) has also led to a significant 4.5% increase in NAV.
Cumulatively, and when added together this has resulted in a very strong NAV and underpins the management approach that has already generated the strongest NAV total returns in the peer group.
UKW's dividend target of 7.72p for 2022 offers shareholders a prospective dividend yield of 4.85%, adds the research house.
At the current share price of 159p, the shares trade at a premium to NAV of 6.5%, which compares to the average over the last five years of 11.8%.