As an investor, I like long-term share price development. Alongside the way in which although, I’m joyful to earn passive revenue streams within the type of dividends. Certainly, dividends are one of my important causes to  put money into some FTSE 100 and FTSE 250 corporations.

Wanting throughout the FTSE 250 in the intervening time, one of many corporations with the very best dividend yield is NextEnergy Photo voltaic Fund (LSE: NESF). In the mean time, the yield is 10.4%.

Meaning if the dividend per share is maintained at its present stage, investing £100 at the moment would hopefully earn me £10.40 in dividends every year.

So ought to I’m going for it?

All the time take a look at the supply of revenue – and sustainability

When contemplating including an revenue share to my portfolio, I at all times look not solely at what it pays now however what I feel it’s more likely to pay in future.

In any case, dividends are by no means assured. One of many prime dividend payers within the FTSE 250 at the moment could not keep that standing in future (for a latest instance, think about Diversified Vitality and its latest dividend reduce).

NextEnergy’s present yield is predicated on its most up-to-date quarterly dividend stage, which at 2.1p was a small step up from the extent paid out final 12 months. Certainly, the share has elevated its annual dividend per share every years for a number of years in a row now.

Final 12 months although, noticed the enterprise swing from a £48m post-tax revenue to an £8m loss.

This 12 months, it has mentioned it’s focusing on a dividend of 8.43p per strange share. That may be a modest rise over final 12 months’s complete – however nonetheless an increase. It expects to cowl that dividend between 1.1 and 1.3 instances. That’s slender protection – however it’s protection nonetheless.

Debt-heavy stability sheet

A number of the strikes the corporate has been making may assist it enhance future dividend protection. For instance, it has been shopping for again its personal shares. Not solely ought to that cut back the overall quantity it must spend on dividends in future, nevertheless it is also value-creating on the FTSE 250 share at the moment sells for a reduction of round 19% to its web asset worth.

That kind of low cost is just not distinctive. However it’s nonetheless excessive and does give me pause for thought. So too does NextEnergy’s stability sheet. Ignoring its choice shares, the corporate has £327m of debt. In opposition to a market capitalisation of £473m that appears uncomfortably excessive to me.

If NextEnergy can return firmly to profitability I’d really feel extra snug in regards to the long-term prospects for its dividend. Narrowing the low cost to web asset worth may assist shareholders, whereas asset gross sales may assist maintain the dividend within the quick and medium phrases.

Set in opposition to that although, are the dangers that include excessive debt ranges. Promoting property helps the stability sheet for now, however has longer-term implications for the dividend.

So though I like its yield, the long-term outlook right here makes me suppose NextEnergy Photo voltaic fund is just not one of the best FTSE 250 revenue share I may personal and won’t be shopping for it.