On Thursday, TD (TSX:TD) Cowen outlined a challenging 2025 Sustainability Outlook, endorsing utility solar companies First Solar (NASDAQ:FSLR) and Shoals Technologies Group (NASDAQ:SHLS), and highlighting Hannon Armstrong (NYSE:HASI) Sustainable Infrastructure Capital (NYSE:HASI) as the top pick due to its robust business model and appealing dividend yield of 6.24%.
According to InvestingPro analysis, HASI appears undervalued at its current price of $26.79, trading at a modest P/E ratio of 13.9. The firm anticipates a "bumpy ride" for 2025, with a focus on utility solar over residential due to potential policy changes.
According to the firm's analysis, the upcoming Trump administration and Republican plans to finance tax cuts expiring at the end of 2025 will be a key area to monitor. These cuts are part of the Tax Cuts and Jobs Act (TCJA) and will require examination of the Investment Tax Credit ( ITC (NS:ITC)) and potential alterations to the Inflation Reduction Act (IRA) to fund them. The firm expects discussions on this topic to intensify after the inauguration on January 20, 2025, and again as the fiscal year closes in September.
TD Cowen predicts that despite potential tax credit changes, utility-scale solar, storage, and wind will remain resilient, with residential solar, hydrogen production, and fuel cell applications facing more risk. The firm does not foresee immediate impacts on the solar market due to safe harboring and potential phased reduction in credits.
The need for grid modernization in the United States has been accelerated by AI-driven demand, leading to anticipated investments in the electrical network. This trend is expected to benefit companies like Itron (NASDAQ:ITRI) and Landis+Gyr (SWX:LAND), as utilities may face rate base increases to invest in grid upgrades.
Hannon Armstrong Sustainable Infrastructure Capital is spotlighted as the firm's 2025 Best Idea. HASI's investment strategy at the asset level ensures steady cash flows, and the firm sees ongoing clean energy investments as a driver for the company's success. InvestingPro data reveals HASI has maintained dividend payments for 12 consecutive years, with a strong current ratio of 6.67 indicating robust liquidity. HASI's diverse asset investments and potential interest rate cuts are seen as factors that will likely enhance its portfolio yield and margins, with a dividend yield of 6.24% adding to its attractiveness.
For deeper insights into HASI's financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.
In other recent news, Hannon Armstrong Sustainable Infrastructure Capital, Inc.
(HASI) has announced the launch of a private add-on offering of 6.375% green senior unsecured notes due 2034. The company continues to maintain strong financial health, boasting a current ratio of 6.67x. Recent developments also include over $5.5 billion worth of potential transactions in the pipeline, a 15% growth in portfolio year-over-year, and a portfolio yield of 8.1% as of September 30, 2024.
HASI has demonstrated consistent dividend payments for 12 consecutive years, with a current yield of 5.3%. In addition, the company manages assets in securitization trusts or vehicles not consolidated on its balance sheet, totaling approximately $6.8 billion. This, combined with its portfolio, has resulted in a 14% growth year-over-year.
Analyst firms, including TD Cowen, BofA Securities, and RBC (TSX:RY) Capital Markets, have expressed confidence in the company's growth trajectory. TD Cowen has maintained its Buy rating on HASI's stock, while BofA Securities has assigned a Buy rating and a price target of $40.00. RBC Capital Markets, despite adjusting its price target to $40.00, maintained an Outperform rating on the stock.
HASI has completed about $1.7 billion in transactions up to November 7, 2024, and anticipates adding roughly 10 new clients in 2024. The company's adjusted return on equity for the nine months ended September 30, 2024, was 12.4%.
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