Not investment advice
LSE:FSFL
Foresight Solar Fund: Simple maths tells us investors should start warming to the sector
Last updated: 10:48 01 Nov 2025 GMT
Is the sun finally going to shine again for the UK solar sector? The UK’s 10-year government bond yield has slipped to 4.39%, its lowest level this year, and that is good news for funds such as Foresight Solar Fund Ltd (LSE:FSFL), whose share price tends to move in the opposite direction to gilt yields.
It comes down to simple maths. Renewable energy trusts are long-term, income-paying assets, not so different from bonds, so when government borrowing costs fall, their relatively generous dividends start to look more appealing.
Historically, the link between gilt yields and renewables valuations has been almost one-for-one, and investors appear to be betting on more of the same as markets look ahead to a possible rate cut from the Bank of England in December.
Foresight Solar has other reasons to feel cheerful. Operationally, this year has brought record sunshine across the UK, helping the company deliver strong generation figures.
Meanwhile, it has locked in favourable power prices through hedging, essentially fixing future revenues in advance, giving the fund a solid cushion of dividend cover for 2025.
At the current share price, Foresight Solar is yielding just over 10% on a 1.3 times covered dividend.
That means its cash generation comfortably exceeds what it needs to pay investors, even after accounting for debt repayments. The trust has never missed a payout since listing in 2013 and has gradually increased its dividend each year.
Support for renewables remains a rare point of stability in Westminster. Ed Miliband, the energy secretary, was one of the few to keep his role in Labour’s recent reshuffle, underlining the cross-party consensus around clean energy investment.
Foresight has also been selling some assets to pay down debt, which should strengthen its balance sheet further. For now, investors are being paid to wait while the market discount, the gap between the share price and the value of its underlying assets, narrows.
With gilt yields on the slide and a steady dividend stream, the outlook for Foresight Solar is starting to look brighter once again.
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