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NRG Yield, Inc. (NYLD)

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NYLD has done well since last few weeks. Time to sell and see how things play out, or hold for further gain? Explo, do you have any opinion on why it dived so much from May? Also suspicious as usual is Morgan Stanley (i think they one of the biggest shorts on WS). They put out a conviction buy type reco just before it tanked !

 

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Honestly I haven't done much DD on yieldcos. I saw and opportunity after they crashed and just managed risk by buying many on the cheap.

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“People used to associate dividend stocks with value,” says John Bailer manager of the $1.1 billion BNY Mellon Income Stock Fund (ticker: MIISX ), “A lot of my competitors are buying bond-proxy oriented stocks, blue-chip, high-quality, never sell ‘em stocks, which are, unfortunately, very expensive.”

"Created by NRG Energy to buy and hold solar and wind assets in July 2013, NRG Yield is the original yieldco. At the time, Wall Street analysts hailed the creation as being transformative. Of course, SunEdison’s spectacular flameout, and its yieldco TerraForm Global’s (GLBL) 80% decline in under a year to a recent $2.58, has given the usually safe investments a bad rap. Bailey says NRG Yield is misunderstood and underappreciated. At a glance, NRG Yield’s debt of some $4.7 billion, nearly triple its $1.6 billion market value, looks alarming. “The difference between NRG Yield and other yieldcos is that NRG has self-amortizing debt,” says Bailer, which he likens to a mortgage. “This debt does not need to be refinanced,” he says. “They also have strong counterparties with regulated utilities.” Bailer sees its dividend rising 30% to $1.20 by 2018 and has a target price of $27. Shares recently at $16.38 have a juicy yield of 5.8%. "

I looked with amazement how it traded at 17.80 to drop to 17.30 today. On impulse, I sold my 16.70 shares and bought PEGI with it, sold PEGI at the breakeven 23.87 and bought NYLD. I hope it works.

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I know that there is a sour mood in the solar land these days, and we are looking into a rough patch for about one year when it comes to manufacturing.  As you know, I always hunt for the opportunities and positive view when misery is lurking.

I have looked at both PEGI and NYLD from many angles. Today I have decided to switch my weight around to NYLD. Mostly I used PEGI coming to my buy price and as mentioned watched the NYLD go up as much as 17.80.

The average price target on the stock is $20, but I dug up in another posting view of $27 per share.

I think NYLD is going to explode relatively soon with solar and wind projects. NRG Energy parent is bidding for about 2.1GW of projects from SUNEQ.  I suspect they will get most of it.  To do it NYLD just sold $350M in bonds and opened up $150M ATM. Their dividend uses only about 70% of CAFD. They are moving into solar and wind projects big time. Parent while in red has roughly $1.5B in cash.

While PEGI has excellent yield, their balance sheet is not so great, even when it will be significantly improved by recent equity sale. 

I thought I would share this with the forum. In my simple view, benefits of getting some or all of those SUNEQ assets will give a huge advantage to NRG and the NYLD.  I suspect that someone may be buying shares ahead of announcements.

PV-Magazine put this note on Friday

http://www.pv-magazine.com/news/details/beitrag/nrg-move-to-acquire-sunedison-assets-moves-forward--expands-to-dg_100025855/#axzz4IDZobXRP

 

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