The UK is dwelling to lots of of high quality dividend shares. And whereas valuations have usually been rising this yr, not all FTSE 350 constituents have been so lucky. In actual fact, Foresight Photo voltaic Fund (LSE:FSFL) is now one of many highest-yielding revenue shares within the index after its shares have taken a near-20% tumble for the reason that begin of 2024.

Foresight Photo voltaic shareholders have really been caught on a downward trajectory since late 2022. And this isn’t precisely stunning, provided that it’s additionally across the time the affect of upper rates of interest began to emerge. Because the enterprise carries quite a lot of debt on its steadiness sheet, greater curiosity bills definitely justify some concern. However now that rates of interest are as soon as once more falling, does the presently depressed valuation current a shopping for alternative?

What’s occurring with Foresight Photo voltaic?

With the affect of local weather change turning into more and more obvious, demand for clear power sources continues to rise. Extra just lately, this pattern has been accelerating as electrical autos and enormous language AI fashions proceed to be deployed worldwide. And it’s a tailwind that Foresight Photo voltaic has been capitalising on for a few years.

As its identify suggests, the group owns a various portfolio of photo voltaic farms scattered throughout the UK. It additionally has a couple of property in Europe and Australia, however administration is within the means of disposing of the latter to refocus the portfolio. Regardless, the continual want for electrical energy has supplied the mandatory money flows to provide a rising dividend. And up to now, shareholders have loved 9 years of consecutive dividend hikes.

But wanting on the group’s newest outcomes, the surge in demand doesn’t seem like translating into monetary progress. Over the primary six months of 2024, working income fell from £92.2m to £74.5m, with EBITDA tumbling from £79.1m to £60.6m.

There are a couple of elements at play. Electrical energy costs have normalised, creating some pricing headwinds. Nonetheless, the bigger challenge is solely dangerous climate. The primary half of 2024 noticed among the “worst weather conditions in the fund’s history”, stopping the photo voltaic enterprise from maximising its producing capability.

A shopping for alternative?

Dangerous climate is irritating and completely out of administration’s management. And it’s a threat issue that can persist and probably even worsen as local weather change continues. Nonetheless, from a monetary standpoint, shares of Foresight Photo voltaic do seem to have been overly punished by buyers.

At present, the dividend inventory trades at a 28% low cost to its internet asset worth regardless of earnings remaining on monitor to help one other dividend hike by the top of 2024. Within the meantime, the proceeds of the Australian asset sale are being allotted to debt discount in 2025, bolstering the group’s steadiness sheet well being as soon as market circumstances enhance.

In my view, this does recommend a shopping for alternative might have emerged for my portfolio. And it will appear that administration agrees, provided that it’s been busy shopping for again shares. In actual fact, the agency’s share buyback scheme has just lately been prolonged to repurchase an extra £10m of them, bringing the entire to £50m.

With publicity to renewables already current in my portfolio, I’m not speeding to purchase Foresight Photo voltaic shares. But it surely’s positively a enterprise I’m taking a better take a look at.