I’ve booked a profit of £400.00 with SOHO

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£11,000 in this 9.4%-yielding FTSE 250 gem could make me £17,158 a year in dividend income over time.

Story by Simon Watkins

FTSE 250 investment manager abrdn (LSE: ABDN) is down 20% from its 15 December 12-month high of £1.86.

This is a continuation of its slide since rumours last July that it would be relegated from the FTSE 100. Just before the chatter began, the stock was trading around £2.37.

The demotion duly happened the following month, prompting FTSE 100-tracker funds to sell their shares in the firm.

In my experience as a former investment bank trader, recently relegated companies can provide good bounce-back opportunities. That is not always the case, as it depends on how they react to their fall from the top tier.

In abrdn’s case, I think the reaction has been very good so far.

What’s the new plan?

Broadly, the firm sought to discard the businesses that were not working and focus on the ones that were.

More specifically, one part of this change is to reduce costs by at least £150m by the end of 2025.

Much of this will come from removing layers of management, particularly in the investments division. Having less bureaucracy in the fast-moving asset management and trading business looks a very good idea to me.

Another part of the plan is to sell off underperforming operations such as the US and European Private Equity operations. Instead, abrdn will focus on major profit-generating businesses, including the UK’s leading direct-to-consumer investment platform, interactive investor.

The final part is to maintain a strong balance sheet to safeguard the confidence of shareholders and clients.

How’s it going?

A risk for the firm is that the plan hits a major snag that could prove expensive to remedy. Another is the high level of competition in the sector that can pressure margins.

But its H1 2024 results on 6 August showed an IFRS post-tax profit of £171m compared to a loss of £145m in H1 2023. Earnings per share also increased – to 9.1p from a 7.7p loss previously.

And assets under management (AUM) increased to £505.9bn from £494.9bn. Net outflows in AUM had been a key reason behind abrdn’s demotion from the FTSE 100 last year.

Interactive investor saw 4% customer growth over the period, and net inflows increased to £3.1bn from £1.8bn.

Abrdn maintained its 7.3p a share interim dividend.

Big passive income generator

Last year, it paid a total of 14.6p in dividends, giving a current yield of 9.4%. This compares to the 3.3% average of the FTSE 250 and the FTSE 100’s 3.7%.

So, £11,000 (the average UK savings amount) invested in the firm now would make £1,034 this year. Over 10 years on the same average yield, this would increase to £10,340, and after 30 years to £31,020.

Crucially though, using the dividends to buy more abrdn shares would dramatically increase these returns.

Doing this (‘dividend compounding’) on a 9.4% average yield would add £17,057 instead of £10,340. After 30 years, an extra £171,529 would have been generated rather than £31,020.

The total investment of £182,529 would be paying £17,158 each year in dividends or £1,430 every month.

It was the renowned scientist and theoretical physicist Albert Einstein who said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” These words are reflected by investor Warren Buffett, who is most associated with the basic wealth building strategy.

The concept behind compound interest is simple. Defined by the Consumer Financial Protection Bureau, “Compound interest is when you earn interest on the money you’ve saved and on the interest you earn along the way.”

Buffett explains it’s power in even simpler terms in his autobiography: a snowball rolling down a long hill, picking up more snow as it gains momentum until it becomes a massive snowball. The Berkshire Hathaway chairman and CEO loves compound interest because it works alongside his investing philosophy, and as one of the wealthiest people in the world, the 93-year-old is an example of compound interest’s real-world success.
Here are some of the reasons why compound interest is the “eighth wonder of the world.”

Wealth Grows Exponentially
Compounding increases the value of the money you have invested by getting the interest earned added back or reinvested to the principal, generating even more earnings. This is the concept that makes the snowball grow larger every day. Principal grows faster the more frequent interest is compounded. Compounding works especially well when it’s allowed to build over time, something Buffett learned at an early age.

Save and Invest Early
Compound interest encourages and rewards individuals to start investing early to maximize growth over many years. We all have to start somewhere, and while Buffett is an exception — he bought his first stock at the age of 11 — compound interest uses the power of early action, time and will, which is fundamental to success.

Buffett Loves the Long Game
The key to Buffett’s success is long-term thinking, exemplified in one of Buffett’s most famous quotes about knowing he would reach wealth, yet not being in a hurry to get there. Notoriously patient, the wealth of Berkshire and Buffett is associated with the importance of value growth over time. Berkshire’s portfolio has held onto some stocks for close to 30 years.

Set It and Forget It
One of the great things about compound interest is that it does much of the work without requiring any intervention from the investor. As long as an investment is paying interest, nothing can stop the snowball from doing the work and growing on its own. This aligns with Buffett’s hands-off approach with many of his stocks.

Compound Interest Doesn’t Discriminate
Of course, the more money you start with, the more you’ll make through compound interest over time. You don’t need to start with a lot, though, you just need to start. Regardless of your bank balance, job or background, anyone can build great wealth with time and consistent investing.

Rewarding Patience Through Investing
In an impatient world, investors are looking to get rich quick. Some are fortunate enough to make millions by catching lightning in a bottle; however, compound interest is a proven wealth builder that doesn’t rely on luck. It may sometimes take longer to see the results of your effort, but this doesn’t mean that the effort is going to waste.

With patience and consistency, compound interest can reap great rewards.

JLEN Environmental Assets Group Limited

Disposal of 51% of Six Anaerobic Digestion Facilities and Capital Allocation Update

JLEN, the listed environmental infrastructure fund, is pleased to announce that it has signed an agreement for the sale of 51% of a portfolio of six gas-to-grid anaerobic digestion (“AD“) facilities (the “AD Portfolio“) to Future Biogas (“Partial Disposal“), for a total consideration of £68.1 million, in line with the valuation as at 30 June 2024. Completion of the Partial Disposal is subject only to a customary condition precedent.   

JLEN will continue to own 49% of the AD Portfolio, which has a combined generating capacity of 38MW, as well as its interests in three further AD assets which are not part of the agreement.

Future Biogas is a specialist developer and has been the operator of the assets comprising the AD Portfolio since they were acquired by the Company between 2017 to 2019.  The Partial Disposal provides a greater alignment of interests between JLEN and Future Biogas, creating the potential for further asset enhancements and life extensions beyond the current Renewable Heat Incentive (“RHI“) subsidy. These initiatives are expected to deliver uplifts to the valuation of the Company’s remaining holding in the AD Portfolio over time.

The AD Portfolio is located in the East of England and the AD assets have been operational since 2013 – 2016. All of the projects in the AD Portfolio benefit from a RHI and Feed-in Tariff subsidy.

Capital allocation update

JLEN has previously announced that proceeds from sales will be used to pay down debt and consider share buybacks, subject to the Board ensuring that the Company maintains a robust balance sheet and can meet its existing commitments.

In that regard, the proceeds of the Partial Disposal will be used to repay amounts outstanding under the RCF which is available to meet existing commitments within the portfolio. In addition, the Company will allocate £20 million of the proceeds of the Partial Disposal to a share repurchase programme.

The Board and the Investment Manager continue to believe that the discount to net asset value (“NAV“) at which JLEN’s shares are currently trading materially undervalues the Company, and so represents an attractive investment opportunity delivering NAV accretion for shareholders.

The Board and the Investment Manager continue to progress further targeted asset sales to recycle capital within the portfolio.

Ed Warner, Chair of JLEN, said:

“This deal is a great outcome for JLEN, enabling us to recycle capital within the portfolio, while continuing to benefit from the future growth and income generated by this attractive AD Portfolio. This is the Company’s second divestment, following the sale of our French wind assets in January 2022, and provides funds for JLEN to commence buybacks in accordance with our stated approach to capital allocation.

We are pleased to continue our partnership with Future Biogas who we have worked with since 2017. Having them as co-owners will help to deliver further value from the business model they have developed and put into practice on other projects for post-subsidy operations. Anaerobic digestion projects such as these have a valuable role to play in the decarbonisation of heat as part of the UK’s net zero goals.”

NextEnergy goes xd tomorrow for 2.10p, if u bought at 87.9p u would receive the right to 5 dividends in just over a year, a yield of 12%. U could re-invest the dividends back into your portfolio, thus increasing the yield to be received.

If the NESF share price has gone up in a year’s time, u could either continue to hold the share or spin it and try to do it all over again with another Trust.

All baby steps.

The Motley Fool

With interest rates falling, it’s time to look at dividend stocks yielding 6%+ for passive income

Edward Sheldon, CFA

With market volatility spiking higher on US recession fears, has the number of London’s investment companies trading at 52-week high discounts followed suit and move higher too?

12 Aug, 2024

We estimate six investment companies saw their respective share prices trade at 52-week high discounts over the course of the week ended Friday 09 August 2024 – just one more than the previous week’s five.

London’s investment company sector proving to be relatively resilient (so far) in the face of the uptick in market volatility seen in recent days. That’s based on the number of companies trading at 52-week high discounts staying close to year lows. Impressive given that on Friday 2 August 2024, 2-year U.S. Treasury yields fell to 4.10%, the lowest level since May 2023, 10-year yields dipped below 4% for the first time since February, while equity markets lurched downwards with Japanese indices leading the way after shedding over 11% on 5 August 2024. Then on Tuesday 6 August, the VIX Index, a gauge of S&P 500 volatility, recorded its largest daily spike since 1990. The cause, elevated fears that the U.S. economy could slip into recession following a run of poor data. In the case of Japan, a tightening in monetary policy didn’t help much either.

And yet, the number of London’s closed-end funds trading at 52-week high discounts barely budged. The apparent resilience could, of course, prove to be temporary – as the graph above shows it was only back in February/March of this year that the number of 52-wk high discounters soared into the 30s as the narrative of higher-for-longer interest rates took hold.

But perhaps that’s it. This time round, what’s worrying markets are fears of a U.S. recession which could end up forcing the Fed’s hand to bring forward those long-awaited rate cuts. And a lower interest-rate environment could provide a positive tailwind for London’s investment companies. That’s because lower interest rates would likely prompt a lowering in the discount rates used to value assets, resulting in valuation uplifts. Lower interest rates would also reduce the pressure on yields offered by trusts to compete with risk-free assets. And lower interest rates would benefit those funds with high debt levels.

“This time is different”, an overly used phrase that more often than not comes back to haunt market commentators. So, not going to use that phrase here then. Time will tell, will just have to do instead !

The 52-week high discounters

Fund

Discount Sector

Tetragon Financial Group TFG

-72.18%

Flexible

abrdn Diversified Income & Growth ADIG

-40.01%

Flexible

Third Point Investors TPOU

-26.60%

Hedge Funds

JPEL Private Equity JPEL

-44.59%

Private Equity

Regional REIT RGL

-79.45%

Property

Ceiba Investments CBA

-69.64%

Property

NextEnergy Solar Fund Limited

(“NESF” or the “Company”)

Unaudited Quarterly Net Asset Value & Operational Update

NextEnergy Solar Fund, a leading specialist investor in solar energy and energy storage, announces its unaudited Q1 Net Asset Value (“NAV”) and operational update for the period ended 30 June 2024.

Key Highlights

Financial:

· Unaudited NAV per ordinary share of 101.3p (31 March 2024: 104.7p).

· Unaudited ordinary shareholders’ NAV of £598.6m (31 March 2024: £618.6m).

· Unaudited Gross Asset Value (“GAV”) of £1,124m (31 March 2024: £1,155m).

· Financial debt gearing (excluding preference shares) of 29.1% (31 March 2024: 29.3%).

· Total gearing (including preference shares) of 46.7% (31 March 2024: 46.4%).

· Weighted average cost of capital of 6.4% (31 March 2024: 6.4%).

· Weighted average cost of debt of 4.5% including preference shares (31 March 2024: 4.5%).

· Weighted average discount rate across the portfolio of 8.0% 1 (31 March 2024: 8.1% 1).

Dividend:

· Attractive high dividend yield of c.10%, as at closing share price on 9 August 2024.

· Total dividends declared of 2.10p per ordinary share for the Q1 period ended 30 June 2024 (30 June 2023: 2.08p).

· Target dividend of 8.43p per ordinary share for the year ending 31 March 2025 (31 March 2024: 8.35p).

· Forecasted target dividend cover of between 1.1x-1.3x for the year ending 31 March 2025.

· Total ordinary dividends declared since IPO of £357m.

Portfolio:

· Portfolio contains 102 1 operating assets following the planned capital recycling programme sale of Whitecross, a 36MW operating solar asset (31 March 2024: 103 1).

· 980MW 2,3 of installed capacity (31 December 2023: 1,015MW 2,3).

· Remaining weighted asset life of 25.9 4 years (31 March 2024: 26.6 years).:

· The Company has successfully delivered two phases of its Capital Recycling Programme at attractive premiums.

· As at 30 June 2024 the Capital Recycling Programme has delivered:

o Two asset sales totalling 95.22MW of installed capacity.

o Raised £42.2m total capital.

o Added 1.84pps to NAV.

o Paid down £38.8m of the Company’s short-term Revolving Credit Facilities.

· Following the successful completion of the second phase of its Capital Recycling Programme, subsequent phases

Share Buyback Programme:

· The Board announced an initial Share Buyback Programme of up to £20m on 18 June 2024.

· As of 13 August 2024, 2,208,090 shares have been purchased and are currently being held in the Company’s treasury account.

Helen Mahy, Chairwoman of NextEnergy Solar Fund Limited, commented:

“This has been a strong quarter for NESF as the Company continues to narrow its discount. This has been achieved through careful management of the portfolio, including the successful sale of assets as part of our Capital Recycling Programme, and the initiation of the Company’s Share Buyback Programme. We believe there are tailwinds which will continue to drive the growth of the UK solar market and that NESF is well-positioned to capitalise on these to deliver continued shareholder value.”

Michael Bonte-Friedheim, CEO of NextEnergy Group said:

“We are pleased with the progress that has been made during the quarter as NESF continues to represent an attractive investment opportunity for existing and new investors, especially with the successful completion of the second phase of our Capital Recycling Programme. NESF continues to offer one of the highest yields for shareholders in the FTSE 350 and we are confident that the UK solar and energy storage markets stand to gain from the election of a new Labour government, which has prioritised renewable energy as the UK looks to meet its Net Zero targets.”

The movement in the NAV over the period was driven primarily by the following factors:

· Increase due to time value, reflecting the change in the valuation as a result of changing the valuation date, prior to adjusting for any outflows of the Company. The increase in value is attributable to the unwinding of the discount applied to cash flows for the period when calculating the DCF.

· A decrease in project actuals showing the difference between actual outturn vs budgeted forecasts, driven by below expected irradiation levels throughout the quarter.

· Future near-term power price forecasts reflect recent higher gas prices (June 2024). Gas prices average 16% higher than the previous forecast, as stronger LNG demand from Asia over summer months and various supply outages tightened short-term market balance. Downward corrections in offshore wind and solar capacity in the short term also put upward pressure on prices.

· In the medium-term, the power price forecast is consistent with previous quarters, with electricity prices falling as the deployment of renewables, particularly offshore wind, increases to reach the Government’s target of 50GW of offshore wind, countervailing the upward pressure from higher commodity prices and electricity demand.

· The trend for wholesale electricity prices in the long-term remains the same as previous quarters, with a slow decline expected due to increasing wind and solar capacities, driven by decarbonisation targets and a gentle decline in assumed costs.

· BESS margins have declined in the short-term (2024-2028) in line with the decrease in wholesale power prices since Q3’23 (July – September 2023), largely due to declines in gas and carbon prices. This decline, driven by a well-supplied energy market following the initial shock from the Russian invasion of Ukraine, has reduced the size of energy trading opportunities available for battery storage projects.

· The valuation incorporates revisions to short-term inflation forecasts from external third parties.

· The sale of Whitecross as part of phase II of the Capital Recycling Programme.

· The revaluation of NextPower III ESG.

· The dividends declared and operating costs incurred during the year, this includes both ordinary and preference share dividend payments.

· Other movements in residual value include changes in FX rates, fund operating expenses, and other non-material movements. Included here is a one-off extraordinary cost associated with the refinancing of the RCF facilities.

Inflation Linkage and Updates

The Company continues to take a consistent approach to its inflation assumptions, using external third-party, independent inflation data from HM Treasury Forecasts and long-term implied rates from the Bank of England for its UK assets. For international assets, IMF forecasts are used. Long-term assumptions are aligned with market consensus including transition to CPI from 2030.

Discount Rate Assumptions

For the UK portfolio, the Company uses multiple sources for UK power price forecasts. Where power has been sold at a fixed price under a Power Purchase Agreement (“PPA”) (a hedge), these known prices are used. For periods where no PPA hedge is in place, short-term market forward prices are used. After two years, the Company integrates a rolling blended average of three leading independent energy market consultants’ long-term central case projections.

For the Italian portfolio, PPAs are used in the forecast where these have been secured. In the absence of hedges, a leading independent energy market consultant’s long-term projections are used to derive the power curve adopted in the valuation.

Power Purchase Agreement Strategy

NextEnergy Solar Fund continues to lock in PPAs over a rolling 36-month period. This proactive risk mitigation helps secure and underpin both dividend commitments and dividend cover, whilst reducing volatility and increasing the visibility of cash flows.

The Company sells REGOs bundled with power sales through existing PPAs as well as unbundled via bilateral arrangements. Where REGOs have been sold at a fixed price, these known prices are used in the calculation of NAV. 93% of REGOs generated for the 2024-25 compliance year have been sold at an average price of £3.9/MWh. 29% of expected REGOs for the 2025-26 compliance year have been sold at £6.9/MWh. Unbundled, unsold REGO volumes of up to c.645GWh/annum are reflected in the NAV in line with third-party advisor forecasts (£5/MWh until March 2028 and then £1.5/MWh for the remaining life of the asset).

Available Capital

Out of the total £205m immediate RCFs available to the Company, c.£61.2m remains undrawn and available for deployment as at 30 June 2024. The Company has c.£3.8m immediate cash balance available at Company level as at 30 June 2024 (this is separate from the cash currently held at Holdco/SPV level).

Future Pipeline

The Company owns the project rights for, or has exclusivity over, a pipeline of c.£500m domestic and international solar (>400MW), domestic energy storage assets (>250MW), and a right of first offer over qualifying projects developed or sourced by the Investment Manager and Investment Adviser.

Remember a target is only a figure to be monitored to see if it is achieved. If it is u only need to check the next dividend announcement to see if u want to to continue to hold. WB states his favourite hold time is forever.

Looking for top dividend growth shares? Here’s one I’d buy for a £1,000 annual passive income!

Royston Wild explains why this 10.1%-yielding FTSE 250 stock might be one of London’s greatest dividend growth shares right now.

Royston Wild

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

Over time, the London stock market’s proved a happy hunting ground for investors seeking dividend growth shares.

With an average dividend yield of around 3.5%, the FTSE 100 and FTSE 250 indexes provide larger dividends than most overseas bourses. This is thanks in part to the UK market’s long-established culture of paying cash rewards.

It’s also because many British companies are well-established in mature markets. They receive stable cash flows in industries like energy, banking, consumer goods and utilities. These can then be distributed in the form of dividends.

Taking care

Dividends are never guaranteed, of course. As we saw during the Covid-19 pandemic, even the most dependable dividend growth stock can suddenly reduce or axe payouts entirely.

Buy buying stocks with strong balance sheets, solid positions in defensive markets, and a proven commitment to paying dividends can greatly enhance an investor’s chance of receiving a healthy passive income.

Here’s one I’d buy if I had spare cash to invest. If analyst forecasts are correct, it could provide a £1k second income this year.

Power play

As the chart shows,  NextEnergy Solar Fund (LSE:NESF)has a long history of raising the annual dividend. In fact, following its decision to raise fiscal 2024’s total payout to 8.35p per share, it’s increased cash rewards every year since its IPO back in 2014.

Being a renewable energy stock, the company benefits from stable cash flows at all points of the economic cycle. Electricity’s one of life’s essential commodities, so NextEnergy has the financial capacity as well as the confidence to pay a growing dividend.

What’s more, with a large proportion of its regulated revenues linked to the Retail Price Index (RPI), its ability to increase dividends remains strong, even during inflationary periods.

There are risks to buying NextEnergy Solar Fund. Energy generation dropped almost 7% last year, to 852GWh, which the firm attributed to “increased rainfall and humidity (which can affect the performance of certain components)”.

But weather-related issues to this extent are uncommon. Indeed, solar panels are well known for providing a consistent flow of electricity, thanks to average yearly irradiation and limited moving parts. This makes NextEnergy a much more reliable profits generator than many other renewable energy shares.

10.1% dividend yield !

As the chart shows, the company’s share price has struggled more recently. Higher interest rates have squeezed its net asset values (NAVs) and pulled down earnings. This could remain a problem too, if inflationary pressures persist and central banks keep rates around current levels.

Yet the spectacular cheapness of NextEnergy’s share price still makes it worth serious consideration, in my opinion. The firm trades at a 22% discount to its estimated NAV per share of 105.7p.

With its forward dividend yield also sitting at 10.1%, I believe it could be one of the best value income stocks out there and worth considering.

If I invested just over £9,900 in NextEnergy shares, this would give me a juicy £1,000 in passive income this year alone. That’s assuming that broker forecasts are accurate.

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As we saw during the Covid-19 pandemic, even the most dependable dividend growth stock can suddenly reduce or axe payouts entirely.

££££££££££

Investment Trusts have reserves they can use to pay their dividends in times of market stress and that is the reason there are only Investment Trusts in the Snowball.