Aggressive Holding Avangrid Inc (NYSE: AGR) rang in the New Year with two major announcements: The company terminated a merger agreement with New Mexico utility PNM Resources (NYSE: PNM) that dated back to October 2020. And first electricity flowed to the New England power grid from 800-megawatt capacity Vineyard 1, the first commercial scale offshore wind facility in the US. Avangrid also affirmed its 2023 earnings per share guidance range of $2.20 to $2.35. But investor skepticism runs deep the combination utility/contract power producer will maintain long-term earnings growth guidance of 6 to 7 percent, demonstrated by the stock’s current price of just 10.9 times expected next 12 months earnings.
Last year’s big drop in shares of NextEra Energy Partners (NYSE: NEP) and parent NextEra Energy (NYSE: NEE) was sudden and staggering. Ironically, their recovery should be just as breathtaking. In the October 5 Income Insights “Regarding NextEra,” I stated the case for a comeback. And since then, the parent has returned nearly 30 percent, while Partners has gained almost 50 percent. Here’s why I think that’s just the beginning.
Shares of Aggressive Holding Atlantic Sustainable Infrastructure Plc (NSDQ: AY) have lost almost one-third of their value this year. That’s pushed the dividend yield well north of 10 percent, a level last seen in early 2016. That’s when the bankruptcy of then-parent Abengoa SA threatened numerous company projects with potential cross-defaults. That forced Atlantica to hold in cash by suspending its dividend for six months. And it wasn’t until June 2021 that the payout was fully restored to the pre-suspension rate.
Aggressive Holding AES Corp’s (NYSE: AES) dividend yield is higher than its P/E multiple. That’s after a -54 percent year-to-date decline in the stock, most of it coming the last couple months as renewable energy and dividend stocks skidded across the board.
The Inflation Reduction Act’s hundreds of billions of dollars of tax credits are the law of the land. But you wouldn’t know that from the sorry performance of renewable energy stocks. That includes Aggressive Holding Clearway Energy (NYSE: CWEN), which has lost nearly one-quarter of its value so far in 2023.
In July 2017, new Aggressive Holding Avista Corp (NYSE: AVA) accepted an all-cash takeover offer of $53 per share from Canadian utility Hydro One (TSX: H, OTC: HRNNF). Then followed basically a year and a half of futility. And the parties eventually broke off their deal in January 2019, when regulators in Idaho and Washington rejected it due to concerns about then Ontario premier Doug Ford. Avista shares overnight dropped from low-50s to the low-30s and have been attempting to fight their way back ever since. The primary hurdle: Investor concerns about regulation in Alaska, Idaho, Montana, Oregon and especially Washington (60 percent of rate base), where the needs of the utility’s eastern state franchise are a world away from coastal politicians.
Last year, Southwest Gas Holdings (NYSE: SWX) shares soared above $90, my “consider taking profits” price listed in the “Portfolio Holdings Trading Above Target” table. We would have done better selling it all.
The last 18 months have been rough going for financial companies. And unfortunately, that’s when we re-entered Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI), a business development company specializing in renewable energy and efficiency projects. Organized as a REIT for tax reasons, Hannon has more than doubled its total assets since 2019. And management reporting year-over-year increases in Q1 of 25 percent and 15 percent in its portfolio and managed assets, respectively. Distributable net income per share stayed on track with guidance for 10 to 13 percent annual growth, fueling robust dividend increases of 5 to 8 percent.
In December 2020, I added FirstEnergy Corp (NYSE: FE) to the Aggressive Holdings on a simple premise: Investor expectations for the outcome of the Ohio bribery scandal were far too pessimistic—and a less gloomy outcome would trigger a big rebound for the stock. As it turned out, the utility’s former management was found guilty of bribing key state officials to pass legislation favorable to the company. But Ohio contributed only about 16 percent of FirstEnergy’s earnings, meaning the state needed the utility more than the other way around. And state and federal regulators have as result focusing on the executives rather than the company, allowing fresh management to repair frayed regulatory relations.
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