Greencoat UK Wind will increase in its annual dividend target to 10p and launch a share buyback programme of up to £100m.
From admission to the London Stock Exchange on 27 March 2013 to 30 September 2023, the company has generated £1,764m of cash flow, paid £887m of dividends and reinvested £877m of excess cash generation. The company has increased its dividend in line with RPI every year and additional funds generated have been reinvested in UK wind power assets to drive NAV growth above RPI, with UKW now delivering net returns to investors of 10%, assuming shares purchased at NAV.
The company feels that it is very well capitalised enabling UKW to benefit from its market leading position, as evidenced by the recent investment in the London Array offshore wind farm.
In line with UKW’s capital allocation policy, which is regularly reviewed by the board, the company always considers a range of options to optimise shareholder returns from its leading market position. Given continued operational strength, which the board and manager believe is not reflected in the current share price, the company is launching a share buyback programme of up to £100m and increasing the annual dividend target to 10p.
A 10p dividend for the 2024 financial year is an increase of 14.2% over the 2023 target dividend of 8.76p. This increase is significantly higher than forecast December 2023 RPI inflation.
In recognition of the very strong cash flow delivered by the business through 2023 to date, the board also has decided to pay a 3.43p per share dividend for Q4 2023 increasing the 2023 full year dividend target to 10p.
Since listing, the aggregate dividend cover has been 2.0x and the average dividend cover is projected to remain strong over the long term, whilst also remaining robust in the face of a range of extreme downside power price sensitivities. The board expects that future dividends will continue to be increased in line with RPI, as has been the policy since IPO.
Share buyback programme
Represents an optimal use of cash to deliver value for shareholders and represents a highly attractive investment opportunity for the company.
The programme will commence shortly, and subject to market conditions, end by no later than 25 October 2024. Repurchased shares will either be held in Treasury or cancelled, either immediately or at a later date. (Treasury shares are not entitled to dividends and have no voting rights at general meetings.)
The company already has powers to buy back up to 347,506,861 shares, equating to c.14.99% of the issued share capital at the time.
Greencoat UK Wind is entering into a non-discretionary arrangement with RBC Europe Limited and Jefferies International to conduct the programme during closed periods. Any purchase of shares during a closed period shall be made independently of the company.
The board will keep the programme under regular review and continue to assess it against its capital allocation priorities in light of the then market conditions and opportunities.
UKW : Greencoat UK Wind ups dividend and launches buyback