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One of my favourite investing tasks is keeping track of the passive income generated by my dividend share portfolio.
The company I’m writing about today features more often than usual in my records because it pays dividends quarterly. Most UK shares only pay out twice a year.
FTSE 250 member Renewables Infrastructure Group (LSE: TRIG) invests in wind and solar farms around the UK and in Europe.
I bought shares in Renewables Infrastructure earlier this year, tempted by the 8% dividend yield and reliable long-term record.
A renewable income?
TRIG, as it’s known, floated on the London Stock Exchange in 2013. This makes it one of the oldest renewable energy investment trusts on the UK market. Past performance is no guarantee of future returns, but I’m encouraged by TRIG’s record of delivering on its targets over the last decade.
One particular attraction for me is that the dividend has never been cut. The payout has grown from 5.5p per share in 2014 to an expected level of 7.5p per share for 2024.
That’s equivalent to an annualised growth rate of 3.2% per year, roughly in line with inflation over the same period.
Reassuringly, TRIG’s latest update confirmed that the dividend should be covered by cash flow this year.
In addition, the trust has been using surplus cash to repay some of its debt. This should reduce the risk of a future dividend cut, in my view.
Why have TRIG shares been falling?
I’m positive about the investment case. But the shares have fallen by nearly 20% this year.
One reason for this is the continued impact of higher interest rates, which are not falling as quickly as expected.
Another problem is that electricity prices in the UK have also been falling. While a lot of TRIG’s revenue is based on fixed prices, some of it is exposed to market pricing.
Finally, energy production from some of TRIG’s wind farms has been disrupted by maintenance and repair delays this year.
I think these problems will gradually ease over time. But I can’t ignore the risk that they might also get worse.
As a result of this sell off, TRIG shares are currently trading at a 25% discount to their last-reported book value of 121.6p per share (30 Sept 2024).
I reckon that’s too cheap. I expect the share price to recover, over time.
I’m not alone, either. Minesh Shah is a managing director at the investment company overseeing TRIG’s investments. On Thursday 14 November, he spent £60,000 buying TRIG shares.
Buying for passive income
TRIG’s exact dividend target for 2024 is 7.47p per share.
To hit my target of £200 a month, I would need to buy 32,128 shares.
That would cost about £29,300, based on the 91p share price at the time of writing.
My position is a bit smaller than this at the moment. But if I have more spare cash, I may add to my holding over the coming months.
