>Babcock and Brown Wind Partners (BBW) is $A1.80 stock which I recommend you get in to soon – it has already gone up 10% in the last 2 trading sessions. It is a longer term investment, but it pays a 6%+ dividend and should appreciate well over the next couple of years. Also it is a good defensive play – which is useful when the market takes downward turns.
So what got me interested in this stock? Well, a lot of my ideas come from reading articles in the online media and then trying to see which companies can leverage off the information I find. This time it was easy. The article I mentioned was in the Australian covering the Howard Government’s decision this week to lift the nation’s “clean energy target” (CET) to 15 per cent of all energy by 2020. This was the first line in the article : AUSTRALIA’S $2 billion wind farm industry is set for exponential growth following this week’s release of higher clean energy targets, with investment plans being dusted off around the country. Pretty catching article, don’t you think?
A similar trend in the usage of wind energy is occurring world wide as the focus on clean energy becomes a prevalent political issue. 
So which local companies can you invest in to leverage the new CET targets? The 2 main ones are BBW and Pacific Hydro. From my research I prefer BBW. So what makes me like this company:
- With the new CET targets (backed by both political parties) the wind farm industry will become a $16 billion industry in the next few years. BBW can leverage well of this given its strong portfolio and management expertise in this area.
- It has solid fundamentals, with significant overseas exposure. It generates a majority of earnings from the US and Europe – both are growing markets. It also has a strong buy recommendation from the analysts covering it.
- Has a 6.5% dividend yield – can’t beat that. While it will always carry a lot debt given the capital intensive nature of the stock, it has solid cash flows enabling it to repay the interest.
The risks to this investment are that building wind turbines is a very capital intensive business and its fortunes are tied to regulatory benefits from governments promoting clean energy. I think the trend to clean energy is growing and this is one stock you want to have some money in.
For more information and to do your own research, you can check out the following links:
Article in the Australian
All you need to know about More information on Wind Generation
Outlook for wind power
Let me know what comments you have on this stock.
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