At 12.54%, no FTSE 250 stock has a higher dividend yield than this one!
The 250 companies on London’s secondary index, the FTSE 250, can provide a ripe hunting ground for those wishing to maximise their income from dividends. At the top end, yields of 10% or more do exist. And today, the number one dividend payer is Bluefield Solar Income Fund (LSE: BSIF) thatâs shelling out an incredible 12.54%.
But before jumping in, it’s worth remembering a few things about investing. For one, we shouldnât be buying just for a percentage yield. We’re not simply buying a âstockâ either. Any money stumped up is an investment in the company itself, its operations and its long-term sustainability. This can help us decipher whether such a massive dividend yield is a golden opportunity or simply a flash in the pan.
The basics
To start with, what does Bluefield Solar Income Fund do? As the name suggests, the trust invests in solar energy assets across the UK. This has expanded to wind and energy storage assets too in recent years. Because much of its income is derived from inflation-linked government subsidies on the push to Net Zero, the fund aims to offer a generous dividend.
On the dividend, the current yield (based on the last 12 months of payments) is unusually high. The last 10 years suggests a yield of 6%-7% is more typical of what to expect.
The reason the yield has surged to double digits is intertwined with its falling share price. The shares were changing hands for 143p as recently as 2022. Since then, a 52% drop in the price has pushed that figure down to 69p along with bumping the dividend yield up too.
So what happened?
Crisis?
Thereâs no one single cause for the drop in the share price. Issues include rising interest rates, political uncertainty and changing longer-term forecasts of renewable energy. The upshot is that those safe, inflation-linked revenues are looking a lot more uncertain.
One red flag in this regard is the huge discount on ‘Net Asset Value’ or NAV. Estimates put the NAV per share at 114p. But the current share price is 69p, a whole 40% cheaper. This suggests that the markets don’t agree with the company’s assessment of its own assets.
The future for the fund is an uncertain one. The company was mulling a change to its business model. This was met with opposition from shareholders. Consequently, the firm has taken the decision to put itself up for sale. No buyers have emerged in the three weeks since that announcement.
What happens from now is difficult to predict. But one thing I’m fairly confident on is that 12% yield is not long for this world. Personally, I’m not interested in adding this type of stock to my portfolio at this stage.
The post At 12.54%, no FTSE 250 stock has a higher dividend yield than this one! appeared first on The Motley Fool UK.
Should you invest £1,000 in Bluefield Solar Income Fund Limited right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bluefield Solar Income Fund Limited made the list?
More reading
John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
