Energy infrastructure-related real estate investment trusts (REITs) are not uncommon. In fact, there are a bevy of enticing opportunities: CorEnergy Infrastructure Trust, InfraREIT and Power REIT.
But there's one unique player that's worth your focused consideration; Hannon Armstrong Sustainable Infrastructure Capital (HASI) and its relentless commitment to energy efficiency and renewable energy. This REIT is one of the most exciting growth-and-income plays you can find right now.
An expert in debt and equity financing, HASI is all set to generate long-term, recurring and predictable cash flows.
What's more, an over 5% dividend yield, a long-term 12.5% earnings growth prospect, (faster than the diversified REIT group average) and you have a turbo-charged contender, poised to increase in value and income-generation capabilities.
While the CorEnergy and Power REITs are primarily centered on energy infrastructure, InfraREIT, is a play on transmission and distribution assets.
HASI, on the other hand, is singularly architected around green energy and energy efficiency. Its diversified portfolio of over 115 investments and multiple customer segments and technologies are designed to minimize commodity and resource variability.
With a high-quality balance sheet consisting of $1.4 billion in assets, a conservative leverage (1.7 to 1 leverage; target is 2.5 to 1), HASI is well-positioned.
If we look at dividends, on an average over the last three years, approximately 80% of its yield has been positioned as a return of capital due to available tax attributes.
Shareholders have enjoyed two straight years of dividend hikes, and currently the stock is at a 5.18% yield -- and not as result of sharp stock declines. HASI's shares have in fact risen 22% year-to-date.
The company's investment activity strategy is crafted around an energy efficiency blueprint, with projects that deploy cleaner energy sources, such as solar and wind to generate power production.
Armed with 30 years of expertise in the field, Hannon Armstrong works predominantly with a global portfolio of a 1000 clients, on vital infrastructure projects. These include the U.S. federal, state and local governments as well as institutions and private developers.
HASI's core segments -- wind and solar -- remain solid. Its $2.5-billion pipeline is stable; at the end of June 30, 2016, the company's portfolio equaled approximately $1.4 billion. This included $400 million in energy efficiency investments -the biggest slice was $972 million in renewable energy (wind and solar) transactions and about $19 million in other sustainable infra investments.
The stock trades at a PEG ratio of 1.51; while we'd have preferred to value HASI on core earnings or adjusted funds flow from operations, given its earnings growth potential and the nature of its safe dividends, HASI cries out for a premium.
The nine analysts offering 12-month price forecasts for Hannon Armstrong Sustainable Infrastructure Capital have a median target of $25 for the stock -- an easy 8% upswing from recent trading.
Add that 5%-plus dividend yield, and you could take home a good 13% in total returns from this one-of-its-kind REIT over the next year.
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