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A lot FTSE 250 shares offer attractive dividends. With passive income on my mind, I have been searching the UK mid-cap index for high yielding stocks to invest in.
One dividend stock that looks interesting is NextEnergy Solar Fund (LSE:NESF), a renewable energy investment company with a diversified portfolio of solar infrastructure assets and complementary technologies, such as energy storage facilities. Currently, the stock is yielding 6.9%.
Here is my view on this green energy business.
Stocks for the future
The NextEnergy Solar Fund has around £1.2bn of assets under management, which includes 99 solar investments. It’s a great choice for an ESG-conscious investor like myself because of the company’s sustainable ethos and positive climate impact. The company’s portfolio of operations is largely concentrated in the UK, but also in the Italian energy market.
Energy security and climate change are two global challenges. The disruption in commodity markets caused by the war in Ukraine required significant government intervention to cover energy prices. In that context, home resources have never looked better. I believe the fund stands to benefit from this tailwind.
The company’s green credentials are strong. For the year ending September 2022, the business estimates that 266,500 tons of CO₂ emissions are avoided due to solar operations. In addition, the asset produces enough energy to power 354,274 homes in the UK.
The main risk facing these FTSE 250 stocks is the possibility that power generation could fall below expectations. Another challenge is the new British windfall tax for renewable energy providers, which is imposed at 45% from 2023 to 2028. If this translates into reduced investment in the sector, it can limit the company’s growth prospects.
Earn passive income from dividends
NextEnergy Solar Fund’s share price is 5% per month. But the dividend yield is the most important reason to invest in this company in my view. After all, the purpose of the fund is to provide shareholders “attractive income, especially in the form of regular and reliable dividends“.
The latest news about the dividend ahead is positive. The next dividend payment on shares of 1.88p per share for the quarter to 31 December 2022 is 1.79p.
To illustrate the point, if I had £1,000 to invest, I could earn over £69 in passive income per year by paying dividends now. That’s more than I can expect from most of them FTSE 100 and FTSE 250 stocks.
Of course, the forward dividend cap is slightly lower at 1.3-1.5 for 2023. I would like it to be higher. However, I need to be stable enough to rely on the fund as a useful passive income generator, especially if growth exceeds expectations.
Why I buy these FTSE 250 stocks
NextEnergy Solar Fund shares benefit from long-term demand for renewable energy solutions. As a long-term investor, I think this company looks like a good buy and hold opportunity for my portfolio.
With a market-leading dividend and a price-to-earnings ratio below five, if I had the money, I’d invest in this stock today.
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