Yieldco Stocks Are Exploding — the Top Ones to Buy Now

Yieldcos started coming public recently with a story very similar to an MLP, but without possessing assets that would qualify for pass-through tax treatment. This entity (yieldco) owns, operates and acquires contracted renewable and conventional generation and thermal infrastructure assets, which are not “MLP-able” assets.

Many of the Yieldco stocks and entities have clean energy assets and may provide investors with an incredible growth vehicle for the future with immediate income to boot. One important issue to consider is that in many cases the top yieldco shareholder is the actual parent company. That may indicate a long-term utility and infrastructure commitment, or it could signal another creative way to unlock value.

All of this has produced strong investor interest in these stocks and/or entities. 24/7 Wall St. has scanned our Wall Street research and many of the firms we cover like the stocks and entities, and the future for the asset class.

Abengoa Yield PLC (NYSE: ABY) may hold the most upside for investors. Abengoa Yield has yet to explode higher like some of the others. It owns renewable energy, conventional power and electric transmission line contracted assets in North America, South America and Europe. Its renewable energy assets consist of concentrating solar power plants and concentrating solar power plants. Currently, Canaccord Genuity and RBC have Abengoa Yield rated as a Buy. Merrill Lynch also has a rating of Buy and a $46 price target. Shares closed Wednesday at $39.79.

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NextEra Energy Partners L.P. (NYSE: NEP) is a growth-oriented limited partnership formed by NextEra Energy Inc. (NYSE: NEE), a leading clean energy company, to own, operate and acquire contracted clean energy projects with stable, long-term cash flows. The entity had a strong debut, and the assets are considered to be top notch. UBS started coverage with a rating of Neutral and a price target of $34, but Merrill Lynch was much more aggressive with a Buy rating and a much higher $44 price target. NextEra Energy Partners closed Wednesday at $35.42.

NRG Yield Inc. (NYSE: NYLD) had a very strong debut and just returned to the market with a secondary offering of more than $500 million. It owns a diversified portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the United States, including fossil fuel, solar and wind power generation facilities that provide the capacity to support more than 1.5 million American homes and businesses. Its thermal infrastructure assets provide steam, hot and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units in multiple locations. Investors now are paid a 2.7% dividend. Its consensus price target is $53.83, but note that shares closed on Wednesday at $54.38.

Pattern Energy Group Inc. (NASDAQ: PEGI) has a portfolio of 11 wind power projects, including one project it has agreed to acquire, with a total owned interest of 1,472 MW, in the United States, Canada and Chile that use proven, best-in-class technology. Pattern Energy’s wind facilities generate stable long-term cash flows in attractive markets and provide a solid foundation for the continued growth of the business. Pattern Energy investors are paid a 4% dividend. The Merrill Lynch price target is $36, and the consensus target is $35.06 Shares ended Wednesday at $33.67.

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