This High-Yielding Renewable Energy Stock Is Right On Track With Its Growth Plan
Renewable Energy

This High-Yielding Renewable Energy Stock Is Right On Track With Its Growth Plan

While Pattern Energy battled headwinds, it made excellent strategic progress during the second quarter.

Matthew DiLallo

Energy, Materials, and Utilities

Earlier this year, Pattern Energy (NASDAQ:PEGI) unveiled a two-year plan aimed at improving the long-term sustainability of its 7.4%-yielding dividend. The renewable energy company expects to grow its cash flow per share at a double-digit annual rate over that time frame. That growth would improve its payout ratio from a dangerous 99% to a more comfortable 80% by the end of next year.

While Pattern Energy experienced some headwinds during the second quarter, the company also made some notable progress on its strategic plan. Because of that, it’s still on track to achieve its targeted payout ratio by the end of next year.

A look at the numbers

Metric

Q2 2019

Q2 2018

Change

Gigawatts hours sold

2,114 GWh

2,263 GWh

(6.6%)

Adjusted EBITDA

$102 million

$108 million

(5.6%)

Cash available for distribution

$53 million

$59 million

(10.2%)

CAFD per share

$0.54

$0.61

(11.5%)

Dividend coverage ratio

1.28 times

1.45 times

(11.7%)

Data source: Pattern Energy.

Pattern Energy’s power production declined by almost 7% compared to the year-ago period. That’s due to asset sales and unfavorable wind conditions, which more than offset the positive impact from acquisitions.

Those headwinds weighed on Pattern Energy’s earnings and cash flow during the period. The company lost $11 million of EBITDA from the asset sales while weaker wind conditions cost it $3 million. It only partially offset those issues by making acquisitions that added $5 million in EBITDA and recording an incremental $3 million of earnings from its investment in development projects. Those same headwinds impacted cash flow, which isn’t yet benefiting from the development segment since it won’t start distributing cash until next year.

Wind turbines at sunset by the shore.

Image source: Getty Images.

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What management had to say

“The portfolio and the business continue to perform well,” according to CEO Mike Garland. “We generated strong CAFD of $53