Tom Konrad, Ph.D., CFA
This October saw falling leaves and falling stocks. Then came the first week of November with its election jitters and stripped the trees of the rest of their leaves like a fifty mile an hour wind sending stocks flying as well.
While Donald Trump’s unpredictable performance has the whole stock market rattled (at least when it looks like he might win), his anti-environment and pro fossil fuel rhetoric have had stocks in the sector quaking like the leaves on an aspen.
Although all its benchmarks were decidedly in the red for October and the first week of November, my Ten Clean Energy Stocks for 2016 fared relatively well. Although the portfolio, its growth and income subportfolios, and my privately managed Green Global Equity Income Portfolio all fell, their declines were smaller than their benchmarks. For the year to date, their out-performance ranged from 11% to 31% over their benchmarks.
Detailed performance for the growth and income subportfolios, my Green Global Income Portfolio, and their various subportfolios can be found in the chart below.
See the original 2016 article for a description of the benchmarks.
The chart below and the following discussion gives detailed performance and discussion for the individual stocks. Click for a larger version.
Pattern Energy Group (NASD:PEGI)
12/31/15 Price: $20.91. Dec 31st Annual Dividend: $1.488 (7.1%). Beta: 1.22. Low Target: $18. High Target: $35.
10/31/16 Price: $22.35. YTD Dividend: $1.171. Expected 2016 Dividend:$1.58 (7.1%) YTD Total Return: 12.9%
11/4/16 Price: 21.62 . YTD Total Return: 9.3%
Wind Yieldco Pattern Energy will release its third quarter earnings on November 7th. Wind speeds were a little disappointing in the first half of the year because of El Nino. Investors will be watching for higher revenues from wind generation now that El Nino is no longer affecting wind patterns. This seems likely, considering that other companies (see NRG Yield and TransAlta Renewables, below) have been reporting strong wind production for the quarter.
Enviva Partners, LP (NYSE:EVA)
12/31/15 Price: $18.15. Dec 31st Annual Dividend: $1.76 (9.7%). Low Target: $13. High Target: $26.
10/31/16 Price: $27.25. YTD Dividend: $1.495 Expected 2016 Dividend: $2.10 (7.7%) YTD Total Return: 49.9%
11/4/16 Price: 27.00 . YTD Total Return: 58.9%
Wood pellet focused Master Limited Partnership (MLP) and Yieldco Enviva Partners announced its earnings on Thursday, November 4th. The company agreed to terms with its sponsor for its second drop-down acquisition which should allow the cash flow and dividend per share growth to continue in 2017. This particular drop-down also has the effect of increasing Enviva’s number of customers, helping to diversify the partnership’s future revenue streams.
Enviva forecasts a per share distribution in 2017 of $2.35 per a share, which would amount to an increase of approximately 12% over 2016.
Green Plains Partners, LP (NYSE:GPP)
12/31/15 Price: $16.25. Dec 31st Annual Dividend: $1.60 (9.8%). Low Target: $12. High Target: $22.
10/31/16 Price: $21.25. YTD Dividend: $1.218. Expected 2016 Dividend: $1.64 (7.7%) YTD Total Return: 41.8%
11/4/16 Price: 18.60. YTD Total Return: 24.1%
Ethanol production Yieldco Green Plains Partners also announced 3rd quarter results. The partnership increased its quarterly distribution to $0.42 per unit, and reported $0.43 in per unit income for the quarter. It’s parent company, Green Plains (GPRE) produced a record volume of ethanol in the second quarter. Revenues increased due to a reviving ethanol market and new ethanol storage acquired out of the Abengoa (ABGB) bankruptcy.
However, the stock’s strong performance so far this year led analysts at Stifel Nicolaus to downgrade the stock from “Buy” to Hold. That and the general election jitters caused the partnership’s units for fall more than 10% in the first week of November, although it still shows significant gains for the year to date.
NRG Yield, A shares (NYSE:NYLD/A)
12/31/15 Price: $13.91. Dec 31st Annual Dividend: $0.86 (6.2%). Beta: 1.02. Low Target: $11. High Target: $25.
10/31/16 Price: $14.73. YTD Dividend: $0.695. Expected 2016 Dividend: $0.96 (6.5%) YTD Total Return: 11.2%
11/4/16 Price: $14.75. YTD Total Return: 11.3%
Yieldco NRG Yield (NYLD and NYLD/A) announced 3rd quarter results on November 4th. Revenues were strong, in large part due to good production from the company’s wind farms. It increased its quarterly dividend to $0.25 (16% year over year growth.) The strong quarter is doubtless why the stock made a slight gain in the first week of November despite the market turmoil.
The company released guidance for 2017, and re-affirmed its targeted 15% annual dividend per share growth of 15% through 2018.
Terraform Global (NASD: GLBL)
12/31/15 Price: $5.59. Dec 31st Annual Dividend: $1.10 (19.7%). Beta: 1.22. Low Target: $4. High Target: $15.
10/31/16 Price: $3.7
5. YTD Dividend: $0.275. Expected 2016 Dividend: $0.60 (16.0%). YTD Total Return: -25.2%
11/4/16 Price: 3.75. YTD Total Return: -25.2%
Yieldco Terraform Global has still not released its much delayed financial statements (although some preliminary information was released in July.) The stock’s decline in October has been mostly driven by rumors about the possible sale or non-sale of its much larger sister Yieldco, Terraform Power (TERP.) These included rumors that SunEdison intended to keep its stake in Terraform Power and restructure the company around that holding, as well as Brookfield ruling itself out as a buyer for Terraform Power.
Hannon Armstrong Sustainable Infrastructure (NYSE:HASI).
12/31/15 Price: $18.92. Dec 31st Annual Dividend: $1.20 (6.3%). Beta: 1.22. Low Target: $17. High Target: $27.
10/31/16 Price: $23.86. YTD Dividend: $0.90. Expected 2016 Dividend: $1.25 (5.5%). YTD Total Return: 26.0%
11/4/16 Price: $19.96 . YTD Total Return: 10.0%
After clean energy financier and REIT Hannon Armstrong reported second quarter core earnings in August, I wrote:
Hannon Armstrong has a target of paying out 100% of core earnings in dividends and a policy of increasing the dividend once per year in the fourth quarter. Since Core Earnings have historically always increased or held constant from quarter to quarter, they typically lag the dividend in the first two quarters, but exceed them in the second half of the year.
I expect this year to be different. Results in the first half of the year were boosted by a larger securitizations (selling assets to third parties rather than keeping them on the books.) While producing strong earnings in the quarter when they happen, securitizations produce no ongoing income. After raising $91 million in equity in June, the company will again return to placing more transactions on the balance sheet, a change which I expect to reduce core earnings in the third quarter before returning to growth in the fourth quarter.
I expect my anticipated decline in third quarter earnings in early November to catch some investors by surprise. Investors looking to buy the stock should wait until then. Investors considering taking some gains may want to sell before the November announcement.
My prediction was on the mark. Core earnings fell from $0.32 per share in the second quarter, to $0.29 this quarter. The stock decline was compounded by the company issuing an additional 3.5 million shares in a secondary offering priced at $20. I remain confident that earnings growth will resume in the fourth quarter and that the company will again raise its quarterly dividend in December to at least $0.34.
The current price of $19.96 seems an excellent and likely fleeting buying opportunity.
TransAlta Renewables Inc. (TSX:RNW, OTC:TRSWF)
12/31/15 Price: C$10.37. Dec 31st Annual Dividend: C$0.84 (8.1%). Low Target: C$10. High Target: C$15.
10/31/16 Price: C$14.81. YTD Dividend: C$0.733 Expected 2016 Dividend: C$0.88 (5.9%) YTD Total Return (US$): 56.2%
11/4/16 Price: C$14.26 . YTD Total Return: 50.6%.
Canadian listed Yieldco TransAlta Renewables’ third quarter results showed expected growth due to previous acquisitions, and the construction of the company’s Australian South Hedland facility continues as planned. Like NRG Yield, the company had a strong quarter of production at its Canadian Wind farms.
Renewable Energy Group (NASD:REGI)
12/31/15 Price: $9.29. Annual Dividend: $0. Beta: 1.01. Low Target: $7. High Target: $25.
10/31/16 Price: $8.75. YTD Total Return: -5.8%
11/4/16 Price: 8.40. YTD Total Return: -9.6%
Advanced biofuel producer Renewable Energy Group reported strong earnings growth in the third quarter, but not as strong as many analysts had been expecting. This combined with the inclusion of REGI in The Street’s “Clinton Portfolio” sent the shares tumbling in the first week of November. I personally think that the “Clinton Portfolio” was very badly designed, and would have weighted such a portfolio much more heavily towards solar installers and manufacturers, rather than biodiesel which has much stronger bipartisan support than solar.
I continue to think REGI is an excellent buy at the current price of $8.40, even if Trump wins the election.
MiX Telematics Limited (NASD:MIXT; JSE:MIX).
12/31/15 Price: $4.22 / R2.80. Dec 31st Annual Dividend: R0.08 (2.9%). Beta: -0.13. Low Target: $4. High Target: $15.
10/31/16 Price: $6.29 / R3.35. YTD Dividend: R0.06/$0.101 Expected 2016 Dividend: R0.08 (2.1%) YTD Total Return: 52.6%
11/4/16 Price: $6.05 / R3.23. YTD Total Return: 46.7%
Software as a service fleet management provider MiX Telematics announced the results for the second quarter of its 2017 fiscal year, which starts in April. Subscriber growth remained weak (8% year over year) due to the depressed energy sector, but showed signs of acceleration late in the quarter. The company is continuing to make progress in its long term strategy of steering customers towards its bundled offerings, which improve margins in the long term at the cost of greater up-front investments.
Ameresco, Inc. (NASD:AMRC).
Current Price: $6.25. Annual Dividend: $0. Beta: 1.1. L
ow Target: $5. High Target: $15.
10/31/16 Price: $4.80. YTD Total Return: -8.7%
11/4/16 Price: 4.95 . YTD Total Return: -18.0%
Energy service contractor Ameresco’s third quarter results continued recover. The company is also increasing its project backlog and investments in owned renewable energy facilities (mostly landfill gas), both of which increase the level and predictability of its future earnings. Giving the company’s improving results and prospects, Ameresco would be a highlight of my own “Clinton Portfolio” if I were to construct one (see comments on Renewable Energy Group, above.) Because Ameresco does much of its business with the federal government, the stock would likely suffer under a Trump administration.
The possibility of a Trump victory on Tuesday has many clean energy investors running for the hills. This creates buying opportunities among stocks that are relatively immune to decisions in the White House, such as Pattern, Renewable Energy Group, and Hannon Armstrong, both of which should advance no matter who is in the White House. Ameresco is my top pick to benefit from a Clinton victory.
Disclosure: Long HASI, AMRC, MIXT,, RNW/TRSWF, PEGI, EVA, GPP, NYLD/A, REGI, GLBL, TERP, GPRE
DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.