The FTSE 250‘s best known as a hunting ground for UK growth stocks. But it’s also home to some surprisingly generous dividend payers. In fact, the index currently yields 3.35%, which is actually higher than the FTSE 100’s 3.1%.
This chunkier payout is in part thanks to high-yielding names such as The Renewables Infrastructure Group (LSE:TRIG) and its eye-catching 10.3% dividend yield. And by bypassing the index funds and investing directly, investors can unlock far more substantial passive income.
But of course, stock-picking has its risks. So is Renewables Infrastructure a potentially winning investment? Or is the yield too good to be true?
What does the company actually do?
As a quick crash course, Renewables Infrastructure Group is a London-listed renewable energy infrastructure investment company owning a 2.3GW portfolio of wind, solar, and battery storage assets across six European markets. Just to put this into some context, in 2025 that was roughly enough electricity to power 1.6 million homes.
It’s a classic infrastructure income play. This means long-duration assets generating predictable cash flows, with revenues largely locked into fixed-price contracts and 90% of debt fixed-rate. The dividend’s grown 25% since IPO and is targeted at 7.55p per share for 2026, covered between 1.1x and 1.2x on a cash basis.
On paper, that sounds like a near-perfect income stock. So why are shares trading at a massive 30.7% discount to net asset value?
Why’s the discount so deep?
The short answer is the same story that has plagued the entire renewable sector – persistently high interest rates.
Higher rates make the fixed-income alternatives like bonds more attractive relative to infrastructure yields. And they also raise the discount rates used to value long-duration assets.
While that doesn’t directly impact cash flows, it does make it harder to sell an asset without offering a discount if the company suddenly needs to raise some cash. And with management outlining plans to raise £400m over the next 12 months through disposals, it’s easy to see why some investors are getting nervous.
However, to management’s credit, the proceeds of these planned disposals are being targeted directly at debt reduction as well as share buybacks. In other words, the plan is to deleverage the balance sheet and simultaneously take advantage of the 30% share price discount.
So should investors consider taking advantage as well?
Income opportunity or trap?
The bull case for buying shares today is straightforward. If interest rates fall meaningfully from here, the discount could reverse sharply, allowing investors to enjoy some juicy capital gains while also locking in a whopping 10.3% yield.
However, if rates stay elevated for longer than expected (a genuine risk given inflationary pressure from the Middle East conflict), the discount could persist or even widen. And with power purchase agreements largely fixing the group’s revenue, the firm won’t easily be able to simply grow its way out of this problem.
So what’s the verdict?
Renewables Infrastructure is a genuinely well-managed fund with a high-quality portfolio and a covered, progressive dividend. But the investment case is heavily dependent on the interest rate trajectory – something that’s completely out of management’s control.
That’s why I’m keeping this stock on my watchlist for now.
Should you invest £5,000 in Renewables Infrastructure Group right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Renewables Infrastructure Group made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
