I have less than a dozen core stocks in my income portfolio and The Renewables Infrastructure Group (LSE: TRIG) is one of them. Here, I’ll explain the reasons why and look at how much I would need to put into this clean energy investment trust to try and bag £150 in monthly passive income.
Reasons to invest
First and foremost, the stock carries a mighty 6.9% dividend yield. As things stand, that’s one of the highest in the FTSE 250.
Second, the company is operating in a renewable energy industry that looks tipped for long-term relevance and growth. It may not seem that way with Labour recently dropping its £28bn green energy pledge. But I expect climate change to become more of a pressing issue.
After all, last month was the warmest January on record. More alarming figures and headlines are almost guaranteed. This could eventually lead to big investments and supportive policies.
Third, the trust is well-diversified across geographies (six European countries, including the UK) and energy generation (it is invested in wind and solar farms as well as battery storage assets).
The shares have struggled
The share price has plunged by around a quarter over the past two years. This is due to higher interest rates, which lead to increased borrowing costs for project developers and raise the overall cost of financing. This can reduce the feasibility of projects like new wind farms and limit growth and profits.
Additionally, the trust’s dividend yield is less attractive on a relative basis. Investors can secure decent risk-free returns by simply holding cash.
We don’t know when interest rates will come down, meaning the share price could remain grounded for some time.
As a result, the trust is currently trading at a massive 22% discount to net asset value (NAV). This seems excessive to me given that 62% of its 12-month contracted revenues are directly linked to inflation.
To me, it looks well-placed to continue dishing out dividends from its cash flows.
Consistency
Since going public in 2013, the trust has consistently paid out every year, even during the pandemic.
Below is the recent record:
| Year | Dividend per share (pence) |
| 2019 | 6.64p |
| 2020 | 6.75p |
| 2021 | 6.76p |
| 2022 | 6.84p |
| 2023 | *7.19p |
| 2024 | *7.36p |
Passive income generation
Of course, any dividend record can be interrupted. No payment is set in stone. Yet the forecast dividend cover was 1.6 times for 2023, which tells us that it’s unlikely the payout is in danger of being cancelled.
Looking ahead, that forecast dividend of 7.36p per share means the stock carries a forward yield of 7.2%.
This means I’d need to buy 20,618 shares to try and generate £1,800 — or the equivalent of £150 a month — in annual passive income. They would set me back about £20,825 in total.
While I don’t have that much lying around to stick into a single stock (especially after Christmas), I did recently add to my holding. And I’m committed to adding more shares to my diversified income portfolio over the coming months.
Once interest rates start coming down, I’m hopeful for some healthy share price gains on top of any passive income I receive.
