Atlantica Sustainable Infrastructure's (NASDAQ:AY) focus on investing in sustainable infrastructure assets paid dividends during the third quarter. Thanks to recent acquisitions and financing initiatives, its cash available for distribution (CAFD) surged 13.6% to $52 million. That helped put the company's 5%-yielding dividend on an even more sustainable foundation. 

Steady progress in the third quarter

Atlantica benefited from its diversified portfolio of sustainable infrastructure assets in the third quarter. One of the highlights was its solar energy business. Revenue from the company's operations in the U.S. improved thanks to better performance from its Mojave asset, which offset weaker solar resources in Spain and the impact of smoke caused by wildfires in California on some of its solar assets in that state.

A money bag with the word dividends written on it.

Image source: Getty Images.

Meanwhile, the company's efficient natural gas assets generated 30% more electricity thanks to a surge in availability. Finally, the company's water operations also helped bolster its results, due mainly to a recent acquisition.

The company also made excellent progress on the strategic front during the quarter. Atlantica closed the $290 million acquisition of an additional equity interest in the Solana solar project in the U.S. during the quarter. That sizable investment should pay dividends in the coming quarters by generating meaningful incremental cash flow.

Atlantica also signed a deal to buy a district heating asset in Canada during the quarter. The company will pay $20 million for a business that generates stable revenue backed by long-term contracts as it provides heat to government, industrial, and commercial customers in Calgary. It's the company's first district heating investment. The company sees lots of growth potential in district energy, including adding new customers to this system and acquiring additional assets elsewhere.

More growth ahead

Atlantica's strong showing in the third quarter has it on track to achieve its full-year CAFD forecast of between $200 million and $225 million. That implies about 12% year-over-year growth at the midpoint from last year's level.

That upward trend in cash flow should continue in 2021. The company has already secured $322 million of growth investments this year, which gives it lots of momentum in 2021, given the late-year timing of the Solana purchase and the pending purchase of the Canadian district energy asset. Meanwhile, the company has identified several other potential investment opportunities across all sectors and regions where it currently operates. It continues to believe it can invest between $200 million to $300 million per year.

Atlantica also continues to take steps to obtain the financing needed to support this growth. It has already generated $216 million in cash this year from project debt refinancing that it can use to fund its growth plan. Overall, it has more than $600 million of corporate liquidity, including $187 million of cash at the end of the third quarter.

With a sizable opportunity set and lots of liquidity, Atlantica should be able to continue growing its CAFD at a healthy pace. That should give the company plenty of power to keep increasing its dividend, which it has done 11 times since 2016. 

A great way to generate income from a more sustainable future

Atlantica Sustainable Infrastructure generates stable cash flow backed by long-term contracts on assets focused on the clean energy and water sectors. It pays a sustainable dividend that it has steadily increased by expanding its portfolio. With one sizable deal recently closed, another smaller one secured, and many more in the pipeline, the company appears poised to deliver sustainable dividend growth for the foreseeable future.


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.