One FTSE 250 stock I’ve decided I’m going to add to my holdings when I next can is Bluefield Solar Income Fund (LSE: BSIF). Here’s why!
Renewable energy
Bluefield is set up as an investment fund and focuses on investing in renewable energy assets such as wind farms, hydro energy, and solar energy. In fact, it was the first solar fund to be listed on the London Stock Exchange back in 2013. The fund began with an initial focus on solar energy but has since expanded its portfolio as the green revolution has sped up in recent years.
So what’s happening with Bluefield shares? Over a 12-month period, they’re down 18% from 139p at this time last year, to current levels of 113p.
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I reckon macroeconomic volatility hasn’t helped the shares. However, I’m still bullish on them as it means I can buy the shares more cheaply right now. I’m more interested in Bluefield’s longer-term performance and returns, rather than a short period marred by external challenges.
My investment case
Starting with risks that could hurt Bluefield, my biggest reason for buying some shares would be for the passive income and growth opportunity. The obvious issue here is that dividends are never guaranteed and only paid at the discretion of the business.
Moving on, Bluefield could be at the mercy of adverse weather conditions that could hinder it from producing energy or hurt output levels. This could hurt performance and payouts. In addition to this, the technology involved in such energy assets is costly to maintain and replace. Big expenditure on this front could also impact its bottom line and sentiment moving forward.
So onto the good stuff then. Bluefield shares look attractive from a returns perspective, offering a dividend yield of 7.6%. This is higher than the FTSE 100 and FTSE 250 averages of 3.8% and 1.9%.
Next, I reckon this level of return could only grow, as well as helping the Bluefield share price climb too. This is linked to the ongoing green revolution as the world looks to move away from traditional fossil fuels. As demand for cleaner energy increases, Bluefield should be able to capitalise, boosting its performance and investor returns in turn.
Finally, Bluefield shares look good value for money on two fronts. Firstly, the shares trade on a price-to-earnings ratio of 13. More tellingly for me, the firm’s net asset value (NAV) per share at 136p, is much higher than its current share price of 113p, indicating the shares are currently undervalued.
Final thoughts
I’ve been thinking a lot recently about how to future proof my holdings. I reckon exposure to renewable energy stocks is one way to go. I’m certainly not saying traditional fossil fuels are to disappear anytime soon. However, demand for renewable energy should only rise in line with a growing global population. This should help firms like Bluefield boost performance and returns.
As with all stocks, there are risks and drawbacks to keep an eye on. Nevertheless, I certainly believe Bluefield will help boost my wealth in the long term.
