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When it comes to passive income, there's a high-yield UK renewable energy fund that catches my eye.
Offering a dividend yield of 7.2%, UK Wind Greencoat (LSE: UKW) invests in wind farms, bioenergy, solar energy and renewable heat infrastructure in the UK.
He FTSE 250 The fund holds £4.91bn of renewable energy assets.
I own 4,707 shares of the company and it has been one of my best-performing investments to date.
I see the move towards renewable energy and decarbonization as a trend that will last at least the rest of my life.
High performance power
The fund's latest purchases include the 42 MW Scottish Dalquhandy wind farm. This addition increases the portfolio to 46 wind farms and more than 1,652 MW of energy generation capacity.
The best is that B.T. It already has a 10-year contract to buy 80% of the energy from Dalquahandy. So it seems like a very good deal to me.
And in the three years since I bought shares, Greencoat UK Wind's performance has been stellar. Profits increased almost tenfold, from £104m to £954m.
Now, if we're heading into a global recession, there could be plenty of attractive assets trading at deep discounts that Greencoat could take advantage of.
So the fact that the fund has a healthy cash balance of £354m gives me confidence going forward.
Enter or reinvest?
Since I don't plan to retire for a few years, I've been reinvesting my dividend payments from these stocks. This increases the number of shares I own over time.
When I started earning passive income from this investment, I was getting around £60 in dividends.
Now, in each financial quarter (every three months), I receive around £100.
What if I use these free dividends to buy more shares? Without any additional effort, I will earn regular passive income in an ever-growing pot.
Why buy now?
We cannot control when other investors sell shares. They may do it simply to pay a tax bill, their children's school fees, or any of many other reasons.
This means funds like Greencoat UK Wind can see their share price fall for no obvious reason.
The shares are currently trading at around 140p, which is a nice 15% discount to the net asset value (NAV) of your holdings.
However, a word of warning. Funds do not always improve to match their NAV price. If investors have persistently poor prospects, the share price may fall further below its NAV.
Earnings per share
However, what I like most about Greencoat UK Wind should be obvious: its high profitability, high-yield dividend and excellent management team.
Manager Stephen Lilley has improved the fund's earnings per share by more than 100% each year since 2020.
Higher earnings per share indicate good value and higher returns relative to other investment options.
Renewable futures
Everything I've seen of Greencoat so far gives me a stronger perspective on his future.
Management has purchased key assets in the UK and dramatically increased revenues and profits.
So for now (and probably for the next 25-30 years) it will take a passive income spot in my portfolio.
