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8point3 Energy Partners Continues Outperforming Expectations

By Travis Hoium – Sep 26, 2016 at 11:20AM

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An earnings beat and a big acquisition will drive 8point3 Energy Partners to strong results in 2016.

Image source: SunPower.

The yieldco market in general may be in turmoil, but 8point3 Energy Partners (CAFD) continues to chug along on its drive to buy solar projects and provide a stable dividend to shareholders. The company reported fiscal third quarter results earlier this week and laid out plans to grow more in the fourth quarter. Here's what you need to know.

Another earnings beat

SunPower and First Solar, 8point3 Energy Partners' sponsors, are two of the most experienced solar developers in the world. So the yieldco should know exactly how its power plants are going to perform quarter-to-quarter. As a result, it should be no surprise that quarterly results were slightly better than guidance. 

Metric

Q3 2016 Guidance

Q3 2016 Actuals

Revenue

$23-$24 million

$26.1 million

Net Income

$10-$11 million

$15.9 million

Adjusted EBITDA

$29-$30 million

$32.9 million

CAFD

$20-$21 million

$24.1 million

Source: 8point3 Energy Partners Q3 2016 earnings release.

The dividend was also raised to $0.2490 per share after the fiscal third quarter, with a guidance of about $0.25 in dividends next quarter. And management increased full-year guidance to revenue of $60.2 million to $61.3 million, net income of $7.7 million to $8.7 million, and CAFD of $74.8 million to $76.8 million.

This year's performance really sets the bar for future operations, especially from a CAFD perspective. And with acquisitions on the horizon there should be more growth ahead.

Setting up for growth

Just before earnings were released, 8point3 Energy Partners said it had agreed to buy a 49% stake in the 102 MW Henrietta solar projects from SunPower for $134 million. The project will add about $10.9 million in annual cash distributions over the 20 year contract live, so it's being bought at an 8.1% cash yield. 

To pay for the project, management said the company would sell equity and possibly use some debt. To that end, after the market closed Thursday the company said it was offering 7 million shares, 8.05 million shares if the underwriter overallotment option is exercised, to pay for the project and future acquisitions. With shares trading at a 6% dividend yield, management thinks it can buy projects accretively with debt and equity, growing the future dividend. 

The steady growth strategy continues

8point3 Energy Partners is intended to be a steady cash flow machine in the solar energy industry, and it's showing that steadiness with third quarter results. Over the next year, the company will acquire even more projects and continue to grow its dividend. And if that continues, the stock should rise. Even if it doesn't, a dividend yield that's 6% and growing makes this a solid investment.

Travis Hoium owns shares of 8point3 Energy Partners, First Solar, and SunPower. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

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8point3 Energy Partners LP
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