Octopus Renewables Infrastructure (ORIT)14 May 2025

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Octopus Renewables Infrastructure (ORIT). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

ORIT shows the tangible benefits of asset diversification…

Overview

Octopus Renewables Infrastructure (ORIT) owns a c. £1bn portfolio of renewable energy generation assets. A key strength is its diversification, with operating assets located in several different countries and spread across different technologies, principally solar, onshore and offshore wind. In the Portfolio section, we look at the tangible benefits of diversification. ORIT also has equity stakes in developers, giving it access to projects at an early stage, with the potential to generate higher returns. 2024’s sale of a fully operational Swedish wind asset for an 11% IRR provides a case study for the ORIT team’s ability to move a project from pre-construction to operation and then sale, generating returns above the trust’s long-term targets.

ORIT currently yields c. 8% and since 2021 has established a track record of increasing its fully covered dividend in step with UK CPI inflation. The dividend target set by the board for the financial year ending 2025, if achieved, would mean the fourth consecutive year of dividend increases in line with inflation. ORIT has a relatively high proportion, 84%, of its energy prices fixed over two years and almost 50% of its assets have inflation linkages over ten years.

ORIT’s high dividend yield is in part a function of its c. 27% discount and in response to this the board has adopted a capital allocation policy that is focussed on reducing debt, buying back shares, and selling some strategically selected assets while maintaining the ability to make selective new investments. We look at this policy in more detail in the Discount section.

ORIT’s manager, Octopus Energy Generation (OEGEN) is one of Europe’s largest investors in renewable energy and the team managing ORIT directly, led by David Bird and Chris Gaydon, has access to over 150 professionals with experience across all aspects of investment and management, covering multiple geographic markets and technologies.

Analyst’s View

ORIT has no direct exposure to the US, where a significant policy shift away from renewables is underway, and is invested across a range of countries that maintain a very constructive approach to renewables. Indirectly, the team reports that equipment supply chains are not affected by tariffs, as generally, the US does not export equipment involved in renewables. Conversely, supply chain pressures could ease if the US imports less. Consequently, the team see the US’s position as, at worst, neutral for ORIT.

In the Dividend section, we show how ORIT’s average asset life has increased from 28 to almost 30 years over the last four years through active management, which is crucial for maintaining and increasing dividend cover over the long term. This gives us further reassurance that the progressive dividend policy can be maintained in the future.

The US is, however, weighing heavily on wider investor sentiment, not least because it clouds the picture for interest rates and inflation, and the knock-on effect for ORIT and its peer group is a continuation of the wide discount. In response, ORIT’s capital allocation policy includes an expanded £30m share buyback programme and a reduction in total debt, funded by asset disposals at or above NAV. These have demonstrated the team’s ability to move a project from pre-construction, through to operation, to generate returns above the trust’s targets. If the very wide discount continues to narrow, investors could achieve returns considerably higher than this.

Bull

• Diversification provides quantifiable benefits to power output
• An 8% yield backed by a covered dividend growing in line with inflation
• Robust capital allocation policy enacted to address the discount

Bear

• Investor sentiment toward listed renewables is weak
• Capital allocation policy reduces ORIT’s ability to acquire new operational assets
• Gearing can amplify losses as well as gains

The Snowball will need to build a new position to replace VSL as it winds down.

Deleted from the watch list of the higher yielding shares.

BSIF,FGEN,NESF,RECI,RGL,SEIT and VSL as they are already in the Snowball.

NCYF,HFEL,TFIF,MGCI and SDV as they currently trade at a premium to NAV.

Deleted

GSF as that ship has already sailed.

SHIP,GRP as they are quoted in U$, another layer of complexity, unless you trade from over the pond.

The final decision would be if you want to add diversification to your Snowball or buy another Trust in a sector where you think the safest yields are.

Of course a lot could change before the cash from VSL arrives, so no decision needs to be made just yet.

Накрутка мобильными arkhipsoft.ru/TermidroidMobilex isutinne1983@gmail.com 191.102.181.100

It’s interesting to see how the UK economy is showing signs of resilience despite the challenges it has faced in recent years. The 0.7% GDP growth in March is a positive indicator, especially when many were expecting worse. The focus on sectors like aerospace, industrials, and real estate seems strategic, given the current economic climate. I’m curious, though, how sustainable this rebound is, particularly with global uncertainties still looming. The emphasis on big-ticket retail items is intriguing—do you think this is a long-term trend or just a temporary opportunity? Also, with the FTSE 100 playing a significant role, how much of this resilience is tied to global market dynamics rather than domestic factors? Would love to hear more about the potential risks that could derail this positive momentum.

Thanks for the commentary. The Snowball is more of a market follower than a predictor of the future. The main criteria is the current dividend/yield and if future dividends will be paid and not drastically altered.

To follow the market you should read the news when the dividend is announced and any interim/final accounts.

The 2025 target for the Snowball is 10k.

The value for the control share VWRP is 130k. Using the 4% rule a pension of £5,200.

If you compound both figures by 7% the Snowball would provide a ‘pension’ of 20% on seed capital and VWRP 10.4%. Gambler or Investor ? The choice is yours my friend.

This 9.7% Dividend Trounced Stocks in a Wild April. It’s Just Getting Started

by Michael Foster, Investment Strategist

About a month ago, Mike Bird, the Wall Street editor for The Economist, tweeted (or “X-ed,” I guess I should say) the following: “You have to concede that there would be a form of stupid, ridiculous beauty in the S&P 500 closing completely flat for April.”

And, well, after all the drama we saw in April, that’s pretty much where we landed.

A Wild – But in the End, Sideways – April for Stocks

I once met Mike for coffee, and he’s a friendly, intelligent person, so it’s easy for me to agree with him here: Yes, the market behaved stupidly in April, starting with the tariff selloff and ending with the first hints of a deal with China (with various back-and-forth moves on tariffs in between). But there’s a lot we can learn from that wild month.

Let’s look at three things that stand out, especially for those of us who aim to invest for high income and a “dividend-driven” retirement.

April Takeaway No. 1: Diversification Works

While stocks have struggled to get into the green this year (and mightily in April!), corporate bonds are up: The benchmark for corporates, the SPDR Bloomberg High-Yield Bond ETF (JNK), has returned a little more than 2% year to date as I write this.

We, of course, prefer to buy bonds through closed-end funds (CEFs), for two reasons:

1. Active management: CEFs – especially those with well-connected managers – have a big advantage over ETFs. The bond world is small, and it pays to “know people who know people” to get in on the best new issues.
2. Bigger dividends: The bond-fund bucket of the CEF Insider portfolio has funds yielding up to 13.7% as I write this, and …
3. Discounts to net asset value (NAV, or the value of the fund’s underlying portfolio), which give us additional upside as they shrink. That’s in addition to gains in the value of the portfolio.

A good example is the PGIM Global High Yield Fund (GHY), which we added to the CEF Insider portfolio in late January. It’s outperformed the S&P 500 since, as of this writing.

GHY Clobbers the S&P 500

Why is GHY beating stocks? The CEF invests in corporate bonds, whose big yields have held up, thanks to the Fed keeping rates higher. That’s letting GHY sustain its 9.7% dividend and attract more investors, especially since defaults have remained low among US and global companies.

It’s a good example of how we can blunt the effect a stock-market crash on our portfolios by investing elsewhere. And of course (and maybe more important!) we diversify our income stream, too. Let’s talk about that next.

April Takeaway No. 2: Dividends Keep Us From “Forced Losses”

GHY, as mentioned, yields 9.7%, or about $80.83 per month per $10,000 invested. That’s a lot more than the $10.25 per month you’d get from an S&P 500 index fund.

The typical index fund’s tiny income stream means that if an investor needed to sell stocks to fund their needs in April, they faced a much higher risk of being forced to do so at a loss. That’s not the case with GHY, with its 9.7% payout. Hence the month was an opportunity for GHY buyers, especially those who bought more when GHY sold off at the start of April.

April Takeaway No. 3: Irrational Investors Give Us an Opportunity

The market also, of course, gets it wrong and overshoots to the downside all the time. That mispricing is something we can pounce on.

Yet again, GHY is an example here. When we added it to the CEF Insider portfolio in January, it was trading at a 3.25% discount to NAV. Now it is trading around par and has moved solidly into premium territory a number of times since our buy.

GHY’s Discount Narrows

As more investors diversify away from stocks and find streams of income to tide them over amidst uncertainty, I expect GHY to see a healthy premium yet again.

These 11.6% (Monthly) Dividends Can Save You From Another “April Surprise”

April’s chaos showed the power of high-yield CEFs like GHY. While the S&P whipsawed, holders of top-notch CEFs didn’t worry. No matter how things panned out, they knew they’d get 7%, 8% 10% and more in cash dividends – every single year.

The best part is, many CEFs – GHY among them – pay dividends monthly. That means you not only get “recession-resistant” income, but your payouts drop into your account right in line with your bills !

How I’d start investing today to aim to build a £1.3m portfolio from scratch

Story by Oliver Rodzianko

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.© Provided by The Motley Fool

The best time to start investing is today.

Whether I have £500 or £50,000, it’s not about the amount but how wisely I allocate it. The key to success is starting early and staying consistent.

Pound-cost averaging

When I started investing, I found pound-cost averaging to be the most effective method for me. I invest a small amount of disposable income from each paycheque into top companies every month, regardless of their current valuation.

As long as these businesses have solid long-term prospects, I keep buying over the years. It’s a simple and reliable approach to building wealth.

One key principle I stick to is diversification. I spread my investments across different businesses to avoid having all my money tied up in just one, reducing the risk of any single company’s downturn.

Getting started

It couldn’t be easier to begin. First of all, I need a Stocks and Shares ISA or a share-dealing account. The provider I’m most fond of is Interactive Investor

Staying the course

I’ve found that one of the best ways to generate strong portfolio profits is by being part of a solid community of investors. That’s one of the main reasons why I appreciate The Motley Fool UK.

More than anything, investing is a lifelong skill. It takes time, patience, and perseverance to build wealth. Developing a successful portfolio is far from a get-rich-quick scheme, and that’s exactly why it works.

As I mentioned, if I invest £200 per month from scratch, I could grow a portfolio worth £1.3m in 40 years, assuming a 10% annual return. Wealth isn’t about luck, it’s about knowledge, preparation, and time spent in the market.

BRLA leaves the Watch List as the Trust is no longer a candidate for the Snowball. As the price rose the yield fell below 6%

* VPC are returning capital so the future yield is the unknown

Remember although a capital gain is always welcome the only consideration for inclusion in the Snowball is the yield, either the buying yield or the current yield.

How much passive income could a £20K Stocks and Shares ISA have made in the past decade?

Stuffing a Stocks and Shares ISA with dividend shares as a passive income idea is one thing — but what might the results be in practice?

Posted by Christopher Ruane

Published 16 May

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

A Stocks and Shares ISA is a long-term investment vehicle.

Different investors use it in different ways. Some want to target capital growth by buying shares cheaply and later selling them for a profit. Some focus on passive income: a regular stream of dividends, or putting the dividends to work to try and earn more income down the road.

So, how much passive income could a £20K Stocks and Shares ISA realistically have earned over the past decade?

The straightforward dividend approach

One variable is the average dividend yield. I will use three to illustrate: the current FTSE 100 average of 3.6%, then 5% and what I see as a high yield, 8%. In today’s market, I think both 5% and 8% are possible while sticking to carefully selected blue-chip shares.

Taking dividends out as they are paid, over a decade, 3.6% would have generated £720 each year – a total of £7,200 over a decade.

Five percent would have been £1,000 each year – a total of £10,000 in a decade. At 8%, the ISA would generate £1,600 a year in dividends. That means the £20K would have generated £16K of passive income over my chosen timescale.

On top of that, an investor may benefit from capital gains when the price goes up (although share prices can fall as well as rise).

Taking the Warren Buffett approach

A second approach is to do what billionaire investor Warren Buffett does.

He has run Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) for decades but during his tenure it has only paid one dividend. That is despite it generating huge cash flows thanks to owning a lot of successful businesses outright while also holding shares in steady dividend payers like Coca-Cola.

It makes sense for Berkshire to keep some cash on hand. It operates in the insurance industry and there is always a risk that an event — like a hurricane — could suddenly push up its short-term cash needs to meet claims. But Berkshire has hundreds of billions of dollars of cash on hand today!

Rather than doling it out as dividends, Buffett aims to put it work to try and earn even more money in future, by making more investments (although the current cash pile means Berkshire hasn’t done as much of that lately).

Compounding an ISA

A similar approach (known as compounding) can be applied to the dividends received in a Stocks and Shares ISA.

Compounding a £20K ISA at 3.6% for a decade, it would be worth over £28,400 – enough to earn £1,025 in dividends at a 3.6% yield.

Compounding at 5%, the ISA would be worth over £32,500 after a decade. That could then earn around £1,628 each year in dividends.

Meanwhile, compounding the £20K ISA at 8% for 10 years, it would be worth over £43K and could then earn £3,454 in passive income annually.

Compounding would have meant sacrificing dividends for a decade but hopefully earning bigger ones from this year onwards (or whenever the investor chose to stop compounding and start withdrawing).

Selecting the right shares is key, but the costs of a Stocks and Shares ISA can eat into overall returns, especially over the long So a savvy investor will start by comparing different ISAs on the market and decide which one suits their needs best.

Nine global funds with the highest Sharpe ratios year in, year out

16 May 2025

Trustnet looks for global funds with high Sharpe ratios in most years of the past decade.

By Gary Jackson

Funds run by Legal & General Investment Management, Columbia Threadneedle and Fidelity are among the handful of global equity strategies that have consistently made their sectors’ highest Sharpe ratios, Trustnet research has found.

The Sharpe ratio measures the risk-adjusted return of an investment by comparing its excess return over the risk-free rate to its standard deviation. A higher Sharpe ratio indicates more return per unit of risk, making it a useful tool for evaluating the efficiency of investment performance.

In this series, Trustnet is looking at the Sharpe ratios of funds over the past decade to find out which ones have spent at least six of those years in their sector’s top quartile for this closely watched risk/return metric.

We start with funds that have a global reach, putting the IA Global, IA Global Equity Income and IA Global Emerging Markets sectors under the spotlight.

Across these three peer groups, there are 381 funds with a track record of 10 or more years, but only nine have been in the top quartile for Sharpe ratio in six of the past decade. They can be seen in the table below, along with their total return over the entire period.

Source: FE Analytics. Total return in sterling between 1 Jan 2025 and 31 Dec 2024.

At the top of the table is L&G Global 100 Index Trust, which has made the highest total return of the nine shortlisted funds – it was up 304.6% over the decade under consideration, compared with a rise of 154.3% for the average fund in the IA Global sector.

The £1.8bn tracker physically replicates the S&P Global 100 index, which is made up of the largest 100 companies from across the globe. This means the portfolio’s biggest holdings are the likes of Apple (11.8%), Microsoft (10%) and Nvidia (9.3%), resulting in a hefty skew towards the US (78.6% of the portfolio).

Performance of L&G Global 100 Index Trust vs sector between 1 Jan 2015 and 31 Dec 2024

Source: FE Analytics. Total return in sterling between 1 Jan 2015 and 31 Dec 2024

The remaining eight funds on the shortlist are active strategies, with Fidelity Responsible Global Equity Income putting in the second-best performance after making 272.7% since the start of the period we examined.

It has been managed by Aditya Shivram since July 2021, although he has run the offshore Fidelity Global Equity Income fund since its launch in 2013. The approach behind the £189m fund looks for sustainable, higher quality companies with stable and/or improving returns on capital, reasonable valuations, low leverage and predictable, stable business models.

Fidelity Responsible Global Equity Income has a much lower allocation to the US than many global portfolios. It has just one-third of its portfolio in US companies, compared with 64.6% in its MSCI AC World benchmark. Six of its top 10 holdings are from outside of the US, including Deutsche Boerse, Munich Re Group, Relx and Unilever.

CT Global Extended Alpha came in third place. Like all the funds on the shortlist, it was top quartile in its sector for Sharpe ratio in six of the 10 full years we examined and made a 232.6% across the decade.

This fund has been run by Neil Robson since 2012 and, unlike the typical global equity fund, follows an ‘equity extension strategy’ that allows proceeds from short positions to be used to extend the portfolio’s long positions – thereby offering more exposure to the strongest investment ideas.

As can be seen, most of the consistent top Sharpe ratio funds are in the IA Global sector while two reside in IA Global Equity Income. Only one – Templeton Emerging Markets Smaller Companies – is in the IA Global Emerging Markets sector.

Templeton Emerging Markets Smaller Companies has been run by Chetan Sehgal since 2017, with FE fundinfo Alpha Manager Vika Chiranewal joining as co-manager in 2020. Like all Templeton emerging market funds, it takes a valuation-oriented approach with a focus on bottom-up analysis and little emphasis on top-down views.

While the nine funds in the table above are the only ones to have achieved top-quartile Sharpe ratios in six of the past 10 full years, there are 35 without a single year in the first quartile.

Among them are Pictet Global Megatrend Selection, CT Global Equity Income, Jupiter Merlin Worldwide Portfolio, TM Stonehage Fleming Global Equities and abrdn Emerging Markets Equity.

The Sharpe ratio is a composite metric which reflects two closely related attributes of an instrument, the reward and ‘risk’. In general, if the risk is expected to be higher then the expected return should also be higher to compensate for the higher chance of a lower or negative return.

The Sharpe ratio is defined as the mean (average) return minus a risk-free return divided by the standard deviation of past returns. Note that the risk-free rate should reflect the periods used (e.g. don’t use an annual risk-free rate for monthly periods). Regardless of the periods selected, the Sharpe ratio value is given as a monthly figure.

Furthermore, the Sharpe ratio graphically represents the slope of a portfolio’s capital market line. Because of this, it can be interpreted also as an amount of additional reward required by an additional 1% of risk. Higher Sharpe ratios are better