Hannon Armstrong: The Climate-Powered Yield Just Got Fatter

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Hannon Armstrong (NYSE:HASI) conscionable raised its quarterly rate dividend by 5.3% to $0.395 per share, for a 4.5% output against nan existent value of nan commons. The raise came connected nan backmost of what had been a torrid fewer months of trading pinch Hannon Armstrong nether unit from a short report, rising Fed money rates, and broader proviso concatenation issues that had affected nan greenish economy. Hannon Armstrong fundamentally functions arsenic a supplier of superior to assets developed by ambiance system companies from power efficiency, renewable energy, and sustainable infrastructure markets.

The internally managed owe REIT's portfolio arsenic of nan extremity of its astir precocious reported 4th fourth stood astatine $4.3 billion, up by 19% complete nan anterior twelvemonth pinch an mean output of 7.5%. Critically, Hannon Armstrong forms a uniquely placed and uncommon mREIT operating successful a space that is group for worldly growth. The power crisis, Russia's warfare successful Ukraine, and US authorities subsidies person supercharged nan modulation to greenish power to create nan backdrop for what should beryllium immense opportunities for Hannon Armstrong to grow its finance pipeline and nan wide vivacity of its mean output connected investments. The second faces headwinds from rising Fed costs rates and is stalked by nan specter of a recession.

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Hannon Armstrong's banal is up 23% year-to-date to return portion successful a wide marketplace rally sparked by a imaginable dovish pivot by nan Fed. I judge this move will proceed to thrust near-term returns moreover arsenic nan applicable financial metrics proceed to travel successful beardown successful early quarters. The income present is what matters successful nan interim and its ascent complete nan past fewer years has been sustained.

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Not including nan astir caller raise and nan quarterly dividend is still up by a 3.83% compound yearly maturation complaint (CAGR) complete nan past 3 years, a fig which increases to 7.14% complete nan past 12 months. The bull lawsuit is now built connected nan REIT building connected its fast-expanding finance pipeline to ramp up EPS and dividends astatine gait complete nan mean to agelong term.

A Revenue Beat And Double-Digit Growth In Distributable EPS

Hannon Armstrong reported gross of $58.3 million for its fiscal 2022 4th fourth earnings, this was up by 8.6% from $53.4 cardinal successful nan year-ago comp and was a hit by $23.22 cardinal connected statement estimates. This maturation was driven by $883 cardinal successful closed transactions during nan quarter. It besides formed astir half of nan full investments made successful nan afloat fiscal twelvemonth pinch Hannon Armstrong's guidance flagging a accelerated description of their finance pipeline during their net call.

Hannon Armstrong fiscal 2022 4th fourth closed transaction

Hannon Armstrong

Transactions during nan 4th fourth were closed astatine an mean output of conscionable supra 8% pinch measurement building up arsenic much certainty is derived connected nan finance and accumulation taxation in installments impacts of nan Inflation Reduction Act. The REIT's finance pipeline, aliases transactions that person nan imaginable to adjacent complete nan adjacent 12 months, stood astatine $4.5 cardinal arsenic of nan extremity of nan 4th quarter.

Hannon Armstrong Investment Pipeline

Hannon Armstrong

This will proceed to spot an almost moreover portfolio divided betwixt grid-connected and behind-the-meter investments pinch sustainable infrastructure coming successful astatine 13%. The respective yields of these markets are broadly akin but they of people connection different dynamics.

Hannon Armstrong Fiscal 2022 Portfolio Yields

Hannon Armstrong

This portfolio forms nan instauration of early shareholder worth and its maturation is now backstopped by nan astir eager portion of greenish power authorities successful US history. This will beryllium further supported by what looks to beryllium a robust consequence to nan power situation sparked by Russia's warfare successful Ukraine.

Providing Capital To The Climate Economy

Hannon Armstrong realized distributable EPS of $0.47 during nan 4th quarter. This missed statement of $0.49 and was unchanged from nan year-ago figure, albeit down from nan anterior 3rd 4th by $0.02 per share. This was connected nan backmost of 4th fourth liking income of $36.8 million, a maturation from $30.5 cardinal successful nan year-ago period. The company's net telephone was a operation of jubilant and sombre pinch nan maturation opportunities flagged by guidance group against nan EPS miss during nan quarter. The EPS diminution was driven by project-level mark-to-market losses connected powerfulness value swaps. Essentially, nan swaps incurred non-cash unrealized losses arsenic power prices rose. The consequent summation successful task worth does not show up successful nan GAAP numbers.

Hannon Armstrong is guiding for distributable EPS to turn astatine a CAGR yearly complaint of 10% to 13% from 2021 to 2024 pinch distributable EPS of $2.08 for nan afloat twelvemonth 2022. This was a maturation of 11% complete fiscal 2021 pinch distributable nett finance income increasing by 34% year-over-year to $180 million. However, whilst I clasp a position, I'm standing nan banal arsenic a clasp because whilst fixed complaint indebtedness accounts for 86% of their borrowings, floating complaint borrowing astatine 14% leaves nan mREIT exposed to further complaint increases which mightiness induce much near-term volatility arsenic we get done this macroeconomic environment.

This article was written by

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The equity marketplace is an incredibly powerful system arsenic regular fluctuations successful value get aggregated to unthinkable wealthiness creation aliases demolition complete nan agelong term. These 2 polarising forces laic astatine nan halfway of my banal coverage. The purpose is to debar wealthiness demolition and clasp wealthiness creation. I chiefly attraction connected sustainable companies, maturation stocks, deSPACs, and income investing.

Disclosure: I/we person a beneficial agelong position successful nan shares of HASI either done banal ownership, options, aliases different derivatives. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

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