Atlantica: Building Sustainable Infrastructure

Growing the overall contribution of renewables is critical to accomplishing the goal of energy independence; Atlantica Sustainable Infrastructure (AY) owns a diversified portfolio of renewable energy, efficient natural gas, electric transmission lines, and water infrastructure, suggests Rida Morwa, editor of High Dividend Opportunities.


The company's renewables sector represented approximately 74% of 2021 revenue, with solar power being the most significant. Atlantica Sustainable Infrastructure (AY) owns, manages, and operates infrastructure in North America (United States, Canada, and Mexico), South America (Peru, Chile, and Uruguay), and EMEA (Spain, Algeria, and South Africa).

In 2021, AY revenues grew 20% YoY, while adjusted EBITDA showed 12% growth. While YoY EBITDA margin decline is noticeable, it is essential to note that the company invested ~$480 million in 2021 to grow its asset base. The majority of these investments were made to fortify and expand operations in North America.

AY operates through long-term contracts with investment-grade rated partners, government entities, and other corporations. The company's assets have a weighted-average remaining contractual life of around 16 years. This way, AY produces stable cash flows and sustains consistent dividend payouts.

90% of AY's long-term debt is fixed-rate or hedged, meaning the company will experience negligible impact from Fed rate hikes. Moreover, ~52% of AY's Cash Available For Distribution (CAFD) is indexed in some manner to provide a hedge against inflation.

It gets better; AY has also utilized the low-interest rate climate to its advantage by lowering its net interest rate to 5.2% (down from 6.9% in 2020). AY's average maturity of corporate debt is ~5.2 years, indicating the company's tremendous flexibility with its cash flow for the near term.

AY's current quarterly dividend of $0.44/share reflects a 5.1% annualized yield. In five years, the company has had an impressive 12% compound annual growth rate in dividends. AY guides 5-8% compound annual growth rate in CAFD growth until 2025, meaning investors can continue to expect growing dividends for the next few years.

2021 CAFD of $2.03 covers the annual dividend 115%. Remember, CAFD is the component of Operating Cash Flow that is calculated after Capital Expenses are removed. This means the company is comfortable distributing this amount despite CapEx projects to expand its infrastructure. You would be relieved to know that 90% of AY's CAFD is in U.S. Dollars, providing comfort during these times of geopolitical tensions.

AY is a solid dividend-growth pick in a sector that will continue to experience global political tailwinds for the foreseeable future. This is your chance to collect a well-covered 5.1% yield, and the opportunity won't last.

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