Dividends May Rise: 10 Clean Energy Stocks For 2015

 My Ten Clean Energy Stocks for 2015 model portfolio had a good May, despite headwinds from the strengthening dollar and declines in clean energy stocks in general.  As a whole, the model portfolio rose 2.2% for the month, the same as my broad market benchmark.  In general, clean energy stocks did worse, with the Powershares Wilderhill Clean Energy ETF (PBW) down 1.9% for the month.  The portfolio's clean energy benchmark, which blends PBW with the more income oriented Utility ETF, JXI, was flat.

For the year to date, the portfolio is up 7.4%, ahead of all its benchmarks for the first time this year.  Their YTD returns were 3.9% for IWM, 7.2% for PBW, 1.4% for the blended benchmark, and -2.5% for JXI.  

Income Portfolio Performance and New Benchmark: YLCO

The six-stock income oriented sub-portfolio continues to shine, up 1.9% for the month and 16.5% YTD.  The fossil fuel free income oriented portfolio I manage with Green Alpha Advisors, GAGEIP, also continues to do well.  It is up 1.5% for the month and 10.2% YTD.  

The benchmark for these income portfolios is JXI (up 1.2% for May and down 2.5% YTD), but as I discussed in previous articles, it is an unsatisfactory benchmark because it lacks a clean energy focus.  That changed on May 28th, with the launch of the Global X YieldCo Index ETF (NASD: YLCO), which focuses on global income-producing clean energy power producers that pay high dividends.  Three of YLCO's 20 holdings are also in this portfolio TransAlta Renewables Inc. (TSX:RNW, OTC:TRSWF), Hannon Armstrong Sustainable Infrastructure (NYSE:HASI), and Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF), but they comprise only 9.2% of YLCO compared to half of the income stocks in my model portfolio.  

One of the most important functions of a benchmark is to indicate what part of a portfolio's return is due to stock selection, as opposed to sector and overall stock market performance.  Hence, YLCO is a much better benchmark for a clean energy income portfolio than JXI because it is also focused on income producing clean energy stocks.  Going forward, I intend to add YLCO as in income benchmark, and substitute it for JXI in the blended clean energy benchmark for the whole portfolio.   I will back-fill performance data for YLCO using JXI for the first five months of the year unless I am able to obtain historical performance information from its underlying Indxx Global YieldCo Index.

Value/Growth Portfolio Performance

The four-stock value and growth sub-portfolio gained 2.6% for the month, and now is down 6.2% for the year.  This remains far behind its benchmark, PBW, which fell 1.9% for the month but is up 7.2% year to date.

The chart below (click for larger version) gives details of individual stock performance, followed by a discussion of the month's news for each stock.

10 for 15 Performance

The low and high targets given below are my estimates of the range within which I expected each stock to finish 2015 when I compiled the list at the end of 2014.

Income Stocks

1. Hannon Armstrong Sustainable Infrastructure (NYSE:HASI)
12/31/2014 Price: $14.23.  Annual Dividend: $1.04.  Beta: 0.81.  Low Target: $13.50.  High Target: $17.  
5/29/2015 Price: $20.48. YTD Dividend: $0.52  YTD Total Return: 47.6%.

Sustainable infrastructure financier and Real Estate Investment Trust Hannon Armstrong continues to go from strength to strength.  The company released first quarter earnings in line with its previous guidance, growing Core Earnings by 35% over the previous year. 

Although I don't consider HASI overvalued at current prices, I have been selling in my own and managed portfolios for re-balancing.  As I wrote many times in 2013 and 2014, I felt it was extremely undervalued in the $10-$13 range in 2013 and 2014. It was my largest position at the start of the year.  Now that it's up almost 50% and more fairly valued, I'm selling to bring it back in line with the rest of my holdings.

Long-time readers who also acquired large stakes below $13 should also consider taking some profits.

The company released its annual Sustainability Report Card.  The company estimates "that assets financed by Hannon Armstrong in 2014 will reduce emissions by more than 340,577 metric tons of GHG per year, equivalent to more than 165,000 tons of coal, and save more than 145 million gallons of water annually."  That's one annual metric ton of GHG saved for every 96 HASI shares, one annual ton of coal saved per 197 HASI shares, and 4.5 annual gallons of water saved per HASI share.  

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