The trust is also achieving its ambition to become a utility-scale investor, which is now giving it the size and clout acquire large institutional size assets, said the research house.
UKW is the UK’s largest listed renewable energy infrastructure fund, with gross assets of GBP3.3bn once the latest acquisition completes.
This increasing size gives benefits to shareholders in a number of ways, says Kepler.
“The overall costs of running the trust have continued to reduce, and scale also allows the managers to negotiate operational cost savings and implement other asset management initiatives.
“Lastly, the trust has the scale to purchase institutionally sized assets. This is increasingly important in what is now a popular market and asset class, and bodes well for the future.”
At a price of 132.4p, UK Wind has a dividend yield is 5.3 % and Kepler says one of the distinguishing features of the trust relative to peers is that it aims to link the dividend with inflation, as measured by RPI.
UKW is on track to pay the 2020 target dividend of 7.1p, added Kepler, representing compounded growth of 18.3% in total since listing and ahead of inflation.
Kepler estimates that dividend cover will remain broadly the same at c. 1.3x [times] this year, based on an assumption that wind resource will be in line with average years, but factoring in significant falls in wholesale electricity prices relative to last year.
“Over the long run, we would hope for more of a surplus which UKW can reinvest to maintain the value of the NAV in real terms. In the interim, investors will be reassured that their dividend remains on track.”
UKW has historically traded at a significant premium to the peer group average but now trades on a premium to NAV of 10.3%, relative to the weighted average for the peer group of 13.1%.
“UKW is in a strong position to continue to grow, which further embeds its competitive position within the sector – with a lower OCF expected next year and its size enabling attractive asset acquisitions.
“With more investors looking for sustainable investments, UKW’s lower premium to peers might make it attractive to potential investors a relative basis.”