Commenting on today’s results, Lucinda Riches, Chairman of Greencoat UK Wind, said:
“The Board and the Investment Manager recognise that this has been a further challenging year for investors and have been working tirelessly to protect and build shareholder value. Net cash generation remained robust at £291 million. Material progress has been made on capital allocation in 2025, having delivered a 12th consecutive year of dividend increases with or ahead of inflation, significant divestments at prevailing NAVs, a sector-leading share buyback programme and a material reduction in debt principal.
We recognise the need to continue to take further action to rebuild shareholder value and we have clear priorities for capital allocation during 2026 which include further divestments, reducing gearing, continuing share buybacks and a disciplined return to reinvestment. Beyond that, our structurally high dividend cover model is expected to deliver around £1 billion of excess cashflow over the next five years which, when supported by further strategic disposals, provides significant optionality to enhance value for shareholders. The Board and the Investment Manager remain fully aligned with shareholders and committed to making the right decisions to deliver long term value for all shareholders.”
Dividend Policy
Following the outcome of the Renewable Obligation (RO) Indexation Consultation, which changed the indexation basis for the RO scheme, the Company has reviewed its dividend policy.
The principal instrument from which the Company derived explicit RPI cashflow linkage was the RO scheme, which will now be indexed to CPI. The Company’s CFD investments also have explicit CPI linkage. The Board therefore determined that its dividend policy will now be to aim to provide shareholders with an annual dividend that increases in line with CPI inflation and, accordingly, the Company will target a dividend of 10.70 pence per share for 2026, a 3.4 per cent increase in line with December 2025’s CPI, which continues to be underpinned by our strong cashflow generation.
After falling up to 45% in 2025, are these now the best stocks to buy in 2026?
Market downturns and managerial mistakes have sent these stocks plummeting, but are they now potentially some of the best to buy for a long-term recovery?
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
When it comes to finding top stocks to buy, often the best place to start is among the biggest losers. Why? Because even when shares fall for a good reason, investors can often overreact, turning a once-overvalued stock into a bargain buying opportunity.
Looking at some of the weakest performers in 2025, Diageo (LSE:DGE) stands out as a frail player, having dropped around 34%. And Severfield (LSE:SFR) has seen its market-cap shrink even further by 45% over the same period.
Image source: Getty Images
Diageo’s turnaround potential
Let’s start with the FTSE 100’s leading beverages business. Diageo’s been mired by adverse market conditions alongside poor strategic decisions from management. But with a new leader at the helm since 2026 kicked off, the company’s already making some radical moves to change its fate.
Portfolio optimisation efforts are already underway, with several of the group’s underperforming brands now under review for potential divestments. No new major disposals have yet been confirmed in 2026. However, such moves would rapidly raise some welcome liquidity to tackle outstanding debts while simultaneously refocusing the business on its best brands.
Of course, divestments also carry significant execution risks. There’s no guarantee Diageo will be able to get a fair price and may end up destroying shareholder value in the process. At the same time, with younger generations seemingly drinking less, it introduces some notable long-term demand uncertainty.
Nevertheless, with the stock trading at just 11.6 times forward earnings following its multi-year share price decline, that might be a risk worth considering.
Engineering steely resolve
Severfield, meanwhile, is another international enterprise hit hard in recent years. As the UK’s largest steel contractor, the business has been hit with a number of headwinds.
Rising commodity prices alongside US tariffs have been squeezing profit margins. And the impact has only been compounded by soft construction sector activity due to higher interest rates. The result has been a sharp decline in sales and a complete collapse of underlying operating profits.
However, the firm’s fortunes could be about to change. With interest rates still on a steady downward trajectory, commercial infrastructure projects have started ramping back up again.
That’s already translated into some early recovery signs for its order book, with management highlighting attractive large-scale projects landing in its 2027 fiscal year (ending in May). And with the UK government also outlining new infrastructure spending ambitions in the coming years, Severfield could be positioned for a multi-year recovery.
What’s the verdict?
To say which stock is the best is very subjective. But between these two fallen icons, Diageo currently looks more interesting, in my opinion. The business appears to have notably more levers it can pull to get things back on track, while Severfield appears more dependent on an external market recovery beyond management’s control.
Diageo shares plunge another 7% on grim results – buying opportunity or value trap?
Diageo shares are falling yet again as 2026 interims disappoint investors this morning. But Harvey Jones wonders if we’re finally looking at the turning point.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
Investors who thought Diageo (LSE: DGE) shares were finally ripe for a recovery have had a brutal wake-up call today (25 February), as full-year 2026 interim results brought yet more bad news. How long can this go on?
I’ve personally bought shares in the FTSE 100 spirits giant five times since the meltdown began in November 2023, triggered by a profit warning as sales in its Latin American and Caribbean market slumped. Despite being one of Britain’s most admired blue-chips, a globally diversified operation with a fantastic array of drinks brands, the news just keeps deteriorating. So is today’s dip the end of the road, or the start of something special?
Image source: Getty Images
Serial FTSE 100 struggler
A word of warning. My glass has always been half full with Diageo. Every time the shares have fallen in the last two-and-a-half years, I’ve added another chunk to my SIPP. Today, its glass looks pretty empty. Yet I’m still tempted.
This morning, the Guinness and Johnnie Walker maker cut full-year 2026 guidance for the second time in three months, with organic net sales expected to fall by 2%-3%. Strong growth in Europe, Latin America and Africa was more than offset by sluggish US sales, where cash-strapped consumers are trading trade down from Diageo’s premium brands to cheaper alternatives. Chinese white spirits also continued to struggle.
Net sales fell 4% to $10.5bn in the six months to 31 December. Adjusted operating profit slipped 2.8% to $3.3bn. For me, the killer blow was news that Diageo slashed its dividend in half, from 40.5 US cents per share to 20 cents.
That’s a real blow, especially as the shares had started to stir, rising around 10% over the last month. Now they’re down 15% over one year and a painful 48% over three.
Dave Lewis must turn this stock around
I suspected the first results under new CEO Dave Lewis might prove sticky. Lewis is best known for his turnaround at Tesco. He began there with a bout of so-called kitchen sinking, getting the bad news out early to reset expectations. I wondered if he might try something similar here. To a degree, he has.
I’m deeply disappointed by the dividend cut. The one consolation of a falling share price was the prospect of a higher yield, which was nearing 5%. Now we’re back around the old 2%. Lewis will have to justify that sacrifice by delivering bags of growth, and hiking the dividend when the good times return. Assuming they do.
He insists he already sees significant opportunities to act more decisively, sharpen competitiveness and broaden the portfolio to drive higher growth. Savings from slashing the dividend will strengthen the balance sheet and boost financial flexibility. Let’s hope he’s right.
Diageo shares now trade on a price-to-earnings ratio of 15.4. That looks good value, but then again it’s looked good value for sometime, and the news keeps getting worse. There may be more painful days ahead, and the lower dividend won’t ease the pain. But for long-term investors willing to sit tight, I still believe Diageo is worth considering. Let’s hope one day I’m proved right.
The Board of FGEN, a leading investor in private environmental infrastructure assets across the UK and mainland Europe, announces that its unaudited Net Asset Value (“NAV”) at 31 December 2025 was £651.7 million (104.6 pence per share). After paying the quarterly dividend of 1.99 pence per share, the Company delivered a positive NAV Total Return of 1.8% for the quarter.
Highlights in the period
· NAV of £651.7 million as at 31 December 2025 (£652.7 million as at 30 September 2025). NAV per share of 104.6 pence, broadly in-line with the end of the prior quarter (104.7 pence as at 30 September 2025).
· Delivering on dividend commitment: Quarterly dividend declared of 1.99 pence in line with the Company’s target of 7.96 pence per share for the year to 31 March 2026, a 2.1% uplift on the previous financial year.
· Cash generation remains robust, underpinned by the resilience of the Company’s diversification strategy, FGEN remains on track to deliver a dividend cover of 1.20x-1.30x for the year after amortising project debt facilities.
· Maintaining a conservative balance sheet remains a key priority. Gearing of 30.9% at 31 December 2025 (30.6% at 30 September 2025).
· Income and growth potential with Rjukan, the Glasshouse and CNG Fuels continuing to progress through their ramp-up phases.
Ed Warner, Chair of FGEN said:
“FGEN has delivered another quarter of stable performance, with NAV broadly unchanged and cash generation remaining robust. Our diversified portfolio continues to demonstrate its resilience, supporting our confidence in meeting the dividend target for the year while maintaining strong dividend cover.
“We remain firmly committed to a disciplined approach to gearing and balance sheet management, ensuring the Company is well positioned for long‑term sustainable growth.
“Our growth assets – including Rjukan, the Glasshouse and CNG Fuels – are progressing through their ramp‑up phases and we see some encouraging signs that support the growth and value-creation potential of the portfolio.”
Summary of changes in NAV:
NAV per share
NAV at 30 September 2025
104.7p
Dividends paid in the period
-2.0p
Power price forecasts
-0.9p
RO/FIT consultation outcome
-0.5p
Battery energy storage forecasts
+0.4p
Inflation
+0.1p
Portfolio performance
-0.1p
Other movements (including discount rate unwind less fund overheads)
+2.9p
NAV at 31 December 2025
104.6p
Valuation factors
Power price forecasts
Short-term power price forecasts provided by independent third-party consultants have softened since the prior valuation date. While this has reduced forward merchant pricing assumptions across the portfolio, the impact has been partially offset by the Company’s existing power price fixes and contracted revenues across a diversified pool of underlying sectors. Overall, the net effect of updated power price forecasts was a reduction in NAV per share of 0.9 pence.
RO/FIT consultation outcome
In line with the Company’s announcement on 14 November 2025, updated assumptions reflecting the outcome of the UK Government’s Renewable Obligation and Feed-in Tariffs consultation have been incorporated into the valuation. From 1 April 2026, both schemes will be indexed at the Consumer Price Index (“CPI”). The impact of these changes reduced NAV per share by 0.5 pence in the period.
Battery energy storage forecasts
Updated third-party revenue forecasts for FGEN’s 100MW operational battery energy storage assets reflect a recovery in market conditions across South England and Scotland. The revised assumptions resulted in an increase in NAV per share of 0.4 pence.
Inflation
Inflation inputs have been updated to reflect the December-to-December actuals for 2025, with RPI and CPI set at 4.18% and 3.32% respectively.
The CPI forecast has been revised to 2.5% from 2026 to 2030, based on third-party forecasts, with longer-term assumptions unchanged. The net impact of updated inflation assumptions increased NAV per share by 0.1 pence.
Portfolio performance
Overall, the portfolio performed broadly in line with expectations, with energy generation being 1.6% under budget before any potential recoveries are considered through either the contractual security in place with external operators or through insurance means.
Within that, national wind speeds and solar irradiance performed below long run averages and unplanned downtime occurred at FGEN’s biomass facility due to leaks in sections of the boiler which are currently being assessed. Offsetting that is another period of exceptional above-budget performance from the Company’s crop-based anaerobic digestion investments – again showing the importance of a diversified portfolio across technologies that include crucial baseload assets that are less susceptible to short term fluctuations in weather patterns.
After another period of resilient operational performance, the Company remains on track to deliver a slightly improved full year dividend cover versus the 1.22x reported for the first six months of the financial year.
Other NAV movements
The usual discount rate unwind net of fund operating costs accounted for 2.1 pence per share of the overall positive movement of 2.9 pence per share for the period. The majority of the balance is driven by two specific value enhancement initiatives.
The Pressure Reduction System which underpins the Gas Shipping value enhancement initiative at Vulcan Renewables contributed 0.6 pence per share to the NAV this quarter, reflecting further value realisation through newly agreed offtake arrangements and continued strong performance on site.
In addition, CNG Fuels’ renewable transport fuel certificate pricing assumptions were raised to 27p, reflecting sustained recent performance and market expectations, adding 0.4 pence per share.
Update on status of FGEN’s growth assets
CNG Fuels continues to perform strongly, with biomethane‑fuelled HGVs remaining the leading large‑scale decarbonisation option supporting a 15% year‑on‑year increase in fuel dispensed, alongside growing adoption of heavier 6×2 vehicles. The RTFC business also remains strongly cash‑generative. At the Rjukan aquaculture facility, operations continue to be optimised and refined following first harvest in 2025 with a gradual production ramp up to the long-term target of 8,000 tonnes of sales per annum by 2028 and EBITDA breakeven forecast for H1 2027 as a critical milestone. Meanwhile, the Glasshouse continues to show strong traction as the UK’s leading domestic supplier of high‑quality medical cannabis, now supplying six of the eight largest clinics in the UK and showing gross profit and EBITDA figures ahead of budget for the year to date – with monthly sales peaking at 270kg in November – above the breakeven level of approximately 200kg per month required to be cash positive.
Gearing
In line with the Company’s stated approach to capital allocation and prudent debt management, FGEN continues to maintain one of the lowest gearing levels in the sector. As at 31 December 2025, total gearing was 30.9%, (30.6% at 30 September 2025) with £128.3 million drawn under the Company’s £150m Revolving Credit Facility.
Dividend
The Company also declares a quarterly interim dividend of 1.99 pence per share for the quarter ended 31 December 2025, consistent with the full-year target of 7.96 pence per share for the year to 31 March 2026, as set out in the 2025 Annual Report. This equates to a yield of 11.8% on the closing share price on 24 February 2026.
This Major Market Rotation Just Handed Dividend Investors A Huge Gift
Feb. 23, 2026
Samuel Smith
Summary
Capital is rotating aggressively, and most investors are reacting emotionally instead of strategically.
Some sectors look unstoppable… others look broken. The truth may surprise you.
Here’s how I’m taking advantage of this massive market rotation to target 7-8% yields with below-market volatility.
So far in 2026, there is sharp dispersion going on in various sectors with the dividend stock universe (SCHD). On the one hand, you have energy stocks (XLE), MLPs (AMLP), infrastructure (UTF), utilities (XLU), and precious metals (GDX) related stocks that are soaring higher.
While this is causing many investors who own shares in BDCs and/or alternative asset managers to panic, for me, it is an ideal investing environment. This is because volatility and dispersion of performance of these income-generating sectors is the very fuel that powers my strategy and my long-term total return outperformance, rather than threatening it. When capital rotates aggressively from one sector to another, valuation multiples tend to become detached from fundamentals, both on the upside and on the downside. This enables me to implement disciplined value investing principles and to recycle capital to produce outsized total returns over the long term. In this article, I will detail why.
When Volatility Becomes a Gift for Income Investors
Put simply, when markets get very volatile and some sectors soar while others plunge, it allows a disciplined value investor to harvest gains from fully valued or overvalued positions and recycle that capital into deeply undervalued opportunities. This enables me to both accelerate my passive income growth by trimming stocks whose dividend yields have become suppressed from soaring stock prices and recycle the capital into stocks whose dividend yields have soared due to their stock price getting beaten down, as well as accelerate my long-term total return compounding because it enables me to arbitrage fluctuations in valuation multiples on top of the compounding already being generated by dividend payouts and growth. By pursuing this strategy while still maintaining some portfolio diversification, it enables me to allow volatility to serve me rather than the other way around.
Why Sector-Level Sell-Offs Are Even Better Than Market Crashes
While a general market sell-off is typically something that I appreciate as an investor who has earned income coming in because it enables me to deploy capital at lower valuations than I would have otherwise, I actually like sector-level volatility far more. Such volatility enables me to not only deploy new capital at attractive yields and valuations into the out-of-favor sectors, but it also enables me to recycle some capital out of in-favor sectors into these out-of-favor sectors, thus further amplifying the amount at which I am able to take advantage of these sell-offs. This is especially true when these dislocations are far more substantial than the underlying changes in fundamentals.
Today, BDCs and alternative asset managers are being hammered by negative headlines, causing leading BDCs like Blackstone Secured Lending (BXSL), Hercules Capital (HTGC), Ares Capital Corporation (ARCC), Blue Owl Capital Corporation (OBDC), and many others to sell off aggressively, while alternative asset managers like Blackstone (BX), Ares Management (ARES), Apollo Global Management (APO), KKR & Co. (KKR), and others are also getting hammered. At the same time, however, these companies all continue to post solid underlying fundamentals, are growing their assets under management and their dividends (in the case of alternative asset managers), and (in the case of BDCs) are keeping their non-accruals fairly low while continuing to pay out attractive dividends. Thus, I think that the sell-off presents a compelling buying opportunity.
Meanwhile, midstream companies generate fairly stable cash flows regardless of the commodity price environment, but they have been soaring higher recently, as have utilities and other infrastructure plays. Precious metals miners have also been soaring higher. Yes, the fundamentals are solid in these businesses, but I think that, in some cases, the run-up has been excessive relative to changing fundamentals. Thus, I am finding increasing opportunities to trim or even sell my holdings in the energy, infrastructure, and precious metals sectors and recycle the capital into higher-yielding and deeply undervalued yet still high-quality alternative asset managers and BDCs that are posting solid fundamentals yet are deeply undervalued.
My Three Unshakable Pillars for Navigating Market Rotations
So how exactly am I doing this, and what principles do I follow as I decide where and how much to trim from positions that are soaring and reallocate to positions that have been oversold by the market?
First of all, value investing discipline guides all of my trades. What that means is I try as much as possible to block out market sentiment and not allow stocks rising rapidly to color my view of fair value, nor a plunging stock to color my view of fair value. Instead, I look at the fundamentals, the conservative outlook for future growth for that business, and determine what a fair value is for that stock.
Another pillar is maintaining portfolio diversification. What this means is that even if one sector is very much in favor and another one is very much out of favor, I seldom would ever go fully into the out-of-favor sector, even if I think it offers much better value, because ultimately I realize that I am not omniscient and that the market could be seeing something that I am not. Therefore, I try to maintain at least some portfolio diversification to guard against a major macro shift completely obliterating my portfolio.
At the same time, though, I implement opportunistic capital recycling. So when fundamentals and value diverge, I tend to rotate capital as guided by my valuation principles, while at the same time somewhat limited by my diversification framework into rotating capital from overvalued positions into undervalued positions.
In so doing, I still maintain diversification, which helps keep my risk-adjusted returns attractive, while also accelerating the compounding process of both my passive income stream as well as my total returns over the long term. It can definitely feel painful in the short term, especially if I sell a position and it continues to soar higher, or I buy a stock, and it continues to plunge lower. In fact, more often than not, this seems to be the case. However, over the long term, this strategy has paid off richly for me, and I expect it to continue doing so moving forward, especially if I can maintain proper diversification so that, at the times when I do get it wrong, it does not completely set me back.
Positioning for AI Disruption Without Overreaching
Another major risk to the strategy in the current market is that AI disruption has the potential to be very significant in the coming years. Therefore, if the market is selling off a stock because of concerns that AI is going to disrupt industries such as the software-as-a-service industry, as I recently detailed here, I need to take extra precautions to make sure that I am not betting heavily against future disruption. I think one way to do this is to either steer clear of sectors altogether or, if I feel like I have a degree of understanding of how the disruption is going to impact it, try to position myself conservatively in the capital stack such that it will likely weather the disruption just fine and, due to the large margin of safety in the valuation that I am buying at, will end up generating attractive total returns over time. This is what I am doing with my investments in senior secured software loans in diversified, actively managed portfolios with skilled managers like HTGC, rather than simply buying the dip in software common equities.
Why This is the Most Important Market Rotation Nobody is Talking About
While chasing hot stocks can be fun and even easy in the near term and lead to strong short-term results, you also run the risk of buying near the top and then getting hammered on the inevitable correction. Instead, if you can be guided by valuation and fundamentals and invest where those are disconnected, while still tempering that opportunistic capital recycling approach with proper portfolio diversification principles, you can view periods of market volatility like this as incredible gifts, as they enable you to allow valuation multiple expansion and contraction to work alongside dividends and per-share growth to accelerate your compounding process over time.
After much deliberation I’ve decided to sell the SNOWBALL shares in SUPR for a total profit of £1,181.00.
The SNOWBALL bought too early so anyone buying later should have earned more profit but it has earned 3,099 pounds in dividends and these have earned more dividends as they were re-invested.
If the SNOWBALL was near to withdrawing the earned dividends, I wouldn’t have sold, as it’s one of the safest highest dividends in the Investment Trust world but as it’s trading back to NAV there may be better but more risky opportunities in the market.
GCP Infrastructure (GCP) is now over 15 years old. Investors who subscribed at IPO have already received all of their investment back in dividends alone.
While the NAV has been fairly stable, factoring in both income and capital from launch to the end of December 2025, GCP generated a total NAV return of 187%. Despite this long-term record, GCP’s shares have traded on a wide – and we feel unjustified – discount for several years. That boosts its dividend yield, which is currently 9.1%.
For two years, GCP has been releasing capital from its portfolio to reduce leverage, fund share buybacks, and improve the overall risk/reward profile of the portfolio. The recently announced exchange, which, if completed, will result in a repayment of £47.5m of loans secured against a portfolio of social housing properties, would take the total to about £128m, well on the way to its £150m target. GCP has repaid almost all of its debt, with the small remaining balance expected to be cleared following this repayment. Alongside this, the company has completed share buybacks totalling £24m of its £50m target. In addition, its investment adviser Gravis Capital Management (Gravis) has identified a £200m pipeline of further potential disposals.
Public-sector-backed, long-term cashflows
GCP aims to provide shareholders with sustained, long-term distributions and to preserve capital by generating exposure primarily to UK infrastructure debt or similar assets with predictable long-term cashflows.
Note: 1) last published as at 31 December 2025
Share price and premium/(discount)
Time period 31/01/2021 to 18/02/2026
Source: Bloomberg, Marten & Co
Performance over 5 years
Time period 31/01/2021 to 31/01/2026
Source: Bloomberg, Marten & Co
12 months ended
Share price TR (%)
NAV total return (%)
Earnings1 per share (pence)
Adjusted2 EPS (pence)
Dividend per share (pence)
30/09/2021
(7.9)
7.2
7.08
7.90
7.0
30/09/2022
3.8
15.8
15.88
8.33
7.0
30/09/2023
(25.2)
3.7
3.50
8.58
7.0
30/09/2024
28.2
2.2
2.25
7.09
7.0
30/09/2025
0.9
3.1
2.15
6.73
7.0
Source: Bloomberg, GCP, Marten & Co. Note 1) EPS figures taken from 30 September each year. Note 2) As disclosed by the company.
Company profile – regular, sustainable, long-term income
More information is available on the trust’s website
GCP Infrastructure Investments Limited (GCP) is a Jersey-incorporated, closed-ended investment company whose shares are traded on the main market of the London Stock Exchange. GCP aims to generate a regular, sustainable, long-term income while preserving investors’ capital. The company’s income is derived from loaning money predominantly at fixed rates to entities which derive their revenue – or a substantial portion of it – from UK public-sector-backed cashflows. Wherever it can, it tries to secure an element of inflation protection.
GCP’s portfolio is diversified across a range of different infrastructure subsectors. It includes exposure to renewable energy projects (where revenue is partly subsidy and partly linked to sales of power), PFI/PPP-type assets (whose revenue is predominantly based on the availability of the asset), and specialist supported social housing (where local authorities are renting specially-adapted residential accommodation for tenants with special needs).
The AIFM and investment adviser is Gravis Capital Management Limited (Gravis). Philip Kent is its CEO and the lead fund adviser to GCP.
The board is targeting a full-year dividend of 7.0p per share for the financial year ended 30 September 2026.
In December 2023, GCP announced a new capital allocation policy which prioritised a reduction in its leverage, improved risk-adjusted returns from the portfolio, and return of capital to shareholders through the use of share buybacks.
Opportunities to provide an attractive dividend yield from a relatively low risk portfolio
As the capital allocation policy progresses, GCP’s core proposition of providing an attractive dividend yield from a relatively low-risk portfolio should shine through.
Annualised downward revaluations of just 0.51%
The infrastructure sector is characterised by a relatively low economic sensitivity. It supports essential services, and this helps underpin predictable and reliable cash flows, which tend to be less correlated with wider markets. For GCP, which targets investments in debt rather than project equity, ranking higher up in the capital structure provides additional comfort. The company’s track record since launch reflects that, with annualised downward revaluations of GCP’s investments running at just 0.51% since launch, and we believe that this would have been lower still had ultra-low interest rate policies not distorted markets. GCP’s loans are backed by assets, which benefits its recovery rate in the event of default.
In the environment of higher interest rates that we find ourselves in, it is easier for GCP to achieve its target rate of return while managing down its risk profile. Under the capital allocation policy, the investment adviser has set out to improve the risk profile – by rebalancing the portfolio to be more debt-like and reducing the volatility in the valuation, while targeting exits in the supported living sector and reducing equity-like exposures – rather than chase ever-higher returns.
For the moment, the emphasis is on driving down GCP’s discount. At the current discount, buying back stock offers a better risk-adjusted return than making new investments. However, there should come a point where the balance shifts. The opportunity set available to GCP is considerable and, when the numbers add up, we would expect that most investors would be keen to see GCP make new investments.
It is clear that cash-strapped governments need to look to the private sector to help fund replacements for crumbling post-war infrastructure, achieve decarbonisation goals, and digitalise economies. GCP can and should have a role to play in this.
Market backdrop
Interest rates
As Figure 1 shows, UK interest rates have fallen across the board since the end of July 2025 (around the time that we last published on GCP). Concerns about UK government finances appear to have been allayed by the recent budget. Against this backdrop, the Bank of England cut its base rate to 3.75% in December 2025, and we could see a further reduction in a matter of weeks as four of nine members of its Monetary Policy Committee voted in favour of cutting the base rate to 3.5% at the last meeting on 4 February 2026.
Figure 1: Shift in UK yield curve since end July 2025
Source: Bloomberg
For GCP, the more important shift is in the medium-to-long-term interest rates. At the end of December 2025, the average life of the portfolio was 11 years and the weighted average yield on the portfolio was 8%.
Inflation
UK inflation has moderated, but in recent months CPI seems to have settled in the 3.0%–4.0% range. A number of economists are predicting that the rate will fall sharply over coming months, which would strengthen the case for further interest rate cuts. At the end of December 2025, 49% of GCP’s portfolio had some form of inflation protection. This provides a degree of cushioning if inflation does prove stickier than expected. Figure 14 on page 10 shows the estimated sensitivity of GCP’s NAV to changes in inflation assumptions.
Figure 2: UK inflation – CPI and RPI
Source: ONS, Marten & Co
UK infrastructure plan
In June 2025, the UK government published its 10-year strategy for economic, housing, and social infrastructure. The plan outlined £725bn of government funding for infrastructure over the next decade, but also promised to create opportunities to unlock other types of new investment into infrastructure, to maximise public investment. Whilst the numbers and the timeframes can be taken with a pinch of salt, it does underscore the need for UK infrastructure investment, and the inability of the government to fund this off its own balance sheet.
Cost disclosures
The issue of misleading cost disclosure, which had been a factor in the emergence of GCP’s discount, has been partially resolved. The FCA’s new rules on consumer composite investments should prove less of a deterrent for investors evaluating investment companies. However, there is still a need to reform MiFID regulations as wealth managers, for example, are still obliged to give their customers misleading information. The FCA is reviewing the situation. Gravis was heavily involved in the campaign for cost disclosure reform.
Asset allocation
As of 31 December 2025, there were 47 investments in GCP’s portfolio, down from 48 at the end of June 2025. The average annualised portfolio yield over the financial year was 8.0% (7.9%), and the portfolio had a weighted average life of 11 years (unchanged).
Figure 3: Split of the portfolio at 31 December 2025
Source: GCP Infrastructure Investments
Since end June 2025, the exposure to PPP/PFI has risen by 2 percentage points, while biomass, gas peaking, hydro-electric, and supported living are all up by 1 percentage point. At the other end of the scale, Solar is down 3 percentage points, while onshore wind and anaerobic digestion are both down by 1 percentage point.
Figure 4: Sector allocation at 31 December 2025
Source: GCP Infrastructure Investments
Figure 5: Security allocation at 31 December 2025
Source: GCP Infrastructure Investments
Since the end of June 2025, GCP’s equity exposure has fallen further from 5% to 4% of the portfolio. This was one of the aims of the capital recycling programme, as was a plan to reduce the exposure to social housing, which will take a big step forward with the recently announced exchange of contracts.
Figure 6: GCP sources of income as at 31 December 2025
Source: GCP Infrastructure Investments
Top 10 investments
Figure 7: GCP’s 10 largest investments as at 31 December 2025
% of total assets 31/12/25
Cashflow type
Project type
Cardale PFI
14.3
Unitary charge
PFI/PPP (18 underlying assets)
Gravis Solar 1
9.2
ROC/FiT
Commercial solar
GCP Programme Funding S14
5.7
ROC/RHI/Merchant
Biomass
GCP Programme Funding S10
5.5
Lease
Supported Living
GCP Bridge Holdings
5.3
ROC/PPA
PPE – Energy-from-waste / Energy efficiency
GCP Biomass 2
4.7
ROC/PPA
Biomass
GCP Social Housing 1 B
4.4
Lease
Supported living
Gravis Asset Holdings H
3.9
ROC/RHI
Onshore wind
GCP Green Energy 1
3.7
ROC/PPA
Commercial solar/onshore wind
GCP Rooftop Solar Finance
3.6
FiT
Rooftop solar
Source: GCP Infrastructure Investment
We long been conscious that the list of GCP’s holdings offers limited insight into what the underlying characteristics of the portfolio. To address this, GCP recently made an investor portal available – Carapace – which allows registered users to explore the portfolio in greater depth.
We would encourage interested readers to request access to the site via GCP’s website.
Figure 8: Top 10 revenue counterparties as at 30 September 2025
Firm
% of total portfolio
Ecotricity Limited
10
Npower Limited
7
Viridian Energy Supply
7
Statkraft Markets GmbH
6
Bespoke Supportive Tenancies Limited
6
Good Energy Limited
4
Gloucestershire County Council
4
Engie Power Limited
4
Power NI Energy Limited
4
Smartestenergy Limited
3
Source: GCP Infrastructure Investments
Figure 9: Top 10 project service providers as at 30 September 2025
Firm
% of total portfolio
WPO UK Services Limited
19
PSH Operations Limited
13
Solar Maintenance Services Limited
10
A Shade Greener Maintenance
10
Vestas Celtic Wind Technology Limited
7
Cobalt Energy Limited
5
Veolia ES (UK) Limited
5
Urbaser Limited
4
Gloucestershire County Council
4
Burmeister and Wain
3
Source: GCP Infrastructure Investments
Recent investment activity
No new investments were made during GCP’s 2025 financial year, although the company did make £24.7m of follow-on investments to support existing borrowers. By the time of the publication of the annual report in mid-December, GCP had made an additional £1.7m of follow-on investments.
Figure 10: Outflows (investments) 12 months to end September 2025
Source: Gravis Capital Partners
Figure 11: Inflows (repayments) 12 months to end September 2025
Source: Gravis Capital Partners
Reflecting the progress made on the capital recycling programme, inflows comfortably exceeded outflows. Over FY25, GCP received £48.5m from scheduled repayments of principal and a further £27.7m of unscheduled prepayments of principal. After the period end and up to mid-December, GCP received an additional £4.4 of cash inflows.
The recent deal in supported housing
On 2 February 2026, GCP announced that certain borrowers had exchanged contracts for the disposal of properties that are leased to registered providers of supported social housing. The proceeds of such disposals, if completed, will repay £47.5m of loans and, allowing for deferred amounts, will generate day one cash proceeds of £43m.
The disposal was in line with the valuation of those loans in GCP’s end September 2025 NAV.
We understand that the loans being repaid include most of those that comprise most of GCP Programme Funding 1 Ltd Series 1, GCP Social Housing 1 Ltd D and two thirds of GCP Social Housing 1 Ltd B. About a third of the loans in that vehicle relate to accommodation leased to MySpace, which was not included in the sale.
We understand that further exits from this part of the portfolio are likely over the course of the rest of the year.
Capital recycling
The investment adviser has identified a substantial pipeline of potential disposals that will reshape the portfolio and free up capital to complete the capital recycling programme.
At 30 September 2025 (before the most recent transaction), the disposal pipeline included portfolios of 33 and 55 supported living assets, a large onshore wind farm, a portfolio of operational and ready-to-build solar assets, a portfolio of gas-to-grid anaerobic digestion plants, and the equity interest in a biomass plant. In addition, there is scope to refinance a portfolio of ground-mounted solar projects, as well as a biomass project.
If executed in full, the disposal programme would reduce the weighted average life of loans in the portfolio from 11 to eight years. However, it would also translate into an increase in the weighted average annualised yield on the portfolio from 8.0% to 8.3%.
Figure 12 summarises the key assumptions that underpin the cash flow forecasts for renewable assets in which the company is invested, and the range of assumptions that the investment adviser observes in the market. GCP’s investment adviser traditionally takes a conversative approach, with the chart highlighting alternative, more aggressive valuation assumptions that could be taken.
The net effect of this is that, were GCP to assume the most conservative assumptions in every category, the end-September NAV of 101.40p would have been reduced to 98.64p. By contrast, were GCP to assume the least conservative assumptions in each category, the NAV would have been 109.27p.
Figure 12: Valuation assumptions as at 30 September 2025
Source: GCP Infrastructure Investments
Sensitivities
The investment adviser also provides a sensitivity analysis for its forecast cash flows. Figures 13 and 14 show the impact of changes in power prices and changes in its base case inflation forecast.
The sensitivity to power prices has fallen once again (in the note we published in January 2025, a 10% fall in prices would have meant a 9.1p fall in the NAV, by August 2025, that figure was 4.7p, and now that figure is 4.0p.
Figure 13: Impact of change in forecast electricity prices
Source: GCP Infrastructure Investments
Figure 14: NAV impact associated with a movement in inflation
Source: GCP Infrastructure Investments
Performance
GCP continues to deliver steady progress in its NAV total return. As in past notes, we have compared GCP’s returns to those of sterling corporate bonds which have some similar risk characteristics to GCP’s investment approach. As Figure 16 shows, GCP has delivered returns well-ahead of sterling corporate bonds over the past five years.
Figure 15: GCP NAV total return
Source: Bloomberg, Marten & Co
Figure 16: GCP NAV total return performance relative to sterling corporate bond performance
Source: Bloomberg, Marten & Co
For shareholders, the main problem has been the widening of the discount that occurred over 2022. Fortunately, more recently the discount has been narrowing again to the benefit of shareholder returns.
Figure 17: Cumulative total return performance over periods ending 31 December 2025
3 months (%)
6 months(%)
1 year(%)
3 years (%)
5 years (%)
GCP share price
5.2
6.0
15.5
(4.0)
2.5
GCP NAV
0.0
1.0
1.5
6.9
34.9
Sterling corporate bonds
2.8
3.6
7.1
19.6
(6.6)
Source: Bloomberg, Marten & Co
Drivers of recent performance
Financial year ended 30 September 2025
Figures 18 and 19 show the factors affecting GCP’s performance over the 12-month period ended 30 September 2025.
Figure 18: Cumulative total return performance over periods ending 31 December 2025
Impact (£m)
Impact (pence)
Inflation forecast
6.8
0.81
O&M budget update
3.1
0.37
Ofgem audits resolved
2.5
0.30
Other
3.7
0.44
Total
16.1
1.92
Source: GCP Infrastructure Investments
The largest positive contributor to the NAV return came from an upward revision of inflation forecasts. Cost savings within GCP’s operations and maintenance budget also helped. In addition, a longstanding issue relating to subsidy entitlements for certain solar projects – which had been under review by Ofgem – has been resolved.
Reassessment of likely curtailment of output at Northern Irish wind assets
(3.4)
(0.41)
Power price move
(2.0)
(0.24)
Other
(1.1)
(0.13)
Total
(66.3)
(7.92)
Source: GCP Infrastructure Investments
On the downside, there was a hit to the NAV that resulted from a reduction in the assumed long-term availability forecast of a portfolio of anaerobic digestion plants.
Although the investment adviser has been working to reduce the portfolio’s sensitivity to power prices and output, lower than forecast generation was an issue over this period. Also, even though gilt yields have been trending down recently, back in Q4 2024 they were rising. That would have been a factor in the decision to increase discount rates.
Factors affecting GCP’s Q4 2025 performance
Over Q4 2025, the most significant influence on the NAV was a further reduction in power price forecasts, which took 0.5p off the NAV. This is an issue that has plagued renewable energy companies and whilst disappointing to see, it is encouraging that the hit to GCP’s NAV was relatively minor. Actual generation was a positive contributor to the NAV. The only other meaningful negative (-0.53p) was the UK government’s puzzling decision to impose changes to the way that subsidies are calculated by replacing RPI with CPI in the calculation. This occurred despite overwhelming opposition, and we fear it will raise the cost of financing the UK’s infrastructure programme as investors factor in an additional risk premium to contracts.
Up-to-date information on GCP and its peers is available on the QuotedData website
Peer group
GCP sits within the AIC’s infrastructure sector. Within this peer group its closest comparator is Sequoia Economic Infrastructure, which – like GCP – invests primarily in infrastructure debt, but using a much broader definition of what constitutes infrastructure. As we have done in previous notes, we have included some information on the renewable energy sector as GCP’s underlying asset exposures are biased to this area.
Figure 20: GCP peer group comparisons
Discount (%)
Yield (%)
Market cap (£m)
NAV 1-year (%)
NAV 3-years (%)
NAV 5 years (%)
GCP
(23.0)
9.1
643
2.1
2.5
6.3
Sequoia Economic Infrastructure
(11.9)
8.4
1,224
5.6
7.1
5.1
Median of other infrastructure peers
(18.5)
3.8
804
12.1
8.0
8.3
Median of renewable energy sector
(40.1)
11.3
293
(2.5)
(2.1)
5.2
Source: QuotedData website as at 19 February 2026
GCP’s five-year returns look reasonable versus its immediate and renewable energy peers and the relative resilience of its debt portfolio versus the equity portfolios of companies in the renewable energy sector is apparent. Sequoia has less renewable exposure than GCP.
Quarterly dividend
Dividends are declared and paid quarterly. Shareholders are able to elect to take their dividend as scrip (in shares rather than cash). For its new financial year, GCP’s target dividend remains stable at 7.0p in line with its previous four financial years.
Premium/(discount)
Over the 12 months ended 31 December 2025, GCP’s shares have traded on an average discount of 28.1%, and as wide as 35.1% and as narrow as 21.3%. As of publishing, the discount stood at 23.0%.
The widening of the discount was initially triggered by the sharp rise in interest rates aimed at choking off inflation. This was compounded by selling from funds of funds and wealth managers, prompted by the misleading cost disclosure rules we discussed on page 5. Since then, progress with disposals and buybacks under the capital allocation programme should have contributed to a reduction in the discount as should cuts to interest rates over the last few quarters and the – albeit partial – resolution to the cost disclosure issue. However, we do not believe that these positives are yet fully reflected in the discount, which should continue to narrow from here.
In pursuit of its capital recycling programme, GCP bought back £22.8m worth of shares over the course of its financial year ended 30 September 2025. Since then, well over 3m more shares have been repurchased. In total, since the programme was announced, 34,610,234 shares have been repurchased.
Figure 21: GCP discount over five years ending 31 January 2026
Source: Bloomberg, Marten & Co
Structure
Fees and costs
The investment adviser receives an investment advisory fee of 0.9% a year of the NAV net of cash. This fee is calculated and payable quarterly in arrears. There is no performance fee. The investment adviser is also entitled to an arrangement fee of up to 1% (at its discretion) of the cost of each new investment made by GCP. Gravis will charge the arrangement fee to borrowers rather than to the company. To the extent that any arrangement fee negotiated by the investment adviser with a borrower exceeds 1%, the benefit of any such excess shall be paid to the company. The investment adviser also receives a fee of £70,000 (subject to RPI adjustments) a year for acting as AIFM, which was £92,000 for the 2025 financial year.
The investment advisory agreement may be terminated by either party on 24 months’ written notice.
Capital structure and life
As of 18 February 2026, GCP has 884,797,669 ordinary shares outstanding, of which 51,595,253 are held in treasury. The number of shares with voting rights is 833,202,416.
GCP is an evergreen company with no fixed life and no regular continuation vote. The company’s financial year end is 30 September and AGMs are held in February.
Gearing
Structural gearing of investments is permitted up to a maximum of 20% of NAV immediately following drawdown of the relevant debt. However, GCP has been targeting debt reduction, and at the end of December 2025 it had net gearing of just 1.2%.
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