Working with solar developers, government buildings, and more, Hannon Armstrong (HASI 6.96%) is incredibly diverse in what it will buy and finance. In this clip from "The High Energy Show" on Motley Fool Live, recorded on May 31, Fool.com contributors Travis Hoium and Tyler Crowe discuss this interesting energy REIT.
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Travis Hoium: The next one that I am going to add is Hannon Armstrong. This is a company that's similar to Brookfield Renewable in that, it is in the financing piece of renewable energy. But they are just incredibly diverse in what they will buy and finance, so they will buy the land under solar farm and just rented out to the solar developer. They did a deal with SunPower to finance the installations that are on people's roofs, they're getting into energy storage. They're doing efficiency also like government buildings. How does the government building pay for changing all the lightbulbs to LED lightbulbs well, Hannon Armstrong will finance that for you, so just a really diverse company and I think the company that is not siloed, and this is what we do. They will do anything as long as it is in the basically the green energy next phase energy buckets. That is why this is my pick also a dividend stock. I don't have the number in front of me, fairly low dividend yield compared to some of the other dividend plays that we've talked about. But,
Jason Hall: [inaudible] 3.6 percent is pretty good right now.
Travis Hoium: Math 3.6 percent.
Jason Hall: Stocks come down a lot this year.
Travis Hoium: I think there's a good opportunity with that one, and I always loved seeing their announcements and going oh man, I never even thought of that as a financing option for renewable energy projects, Tyler you are up next.
Tyler Crowe: While I was going to say what hand and onshoring, the reason that they are probably coming down significantly, at least one of the reasons is in rising interest rate environment. They are a company that borrows to lend, and as a result, when borrowing costs go up, lending costs, the margin spread for how much you actually make on that is lower, and so there might be pricing into that. But one thing to keep in mind with those things is that these are complete victim companies like if they have higher borrowing costs, they're going to raise their rates of return.
Travis Hoium: Absolutely.
Tyler Crowe: Required on their new projects, so don't get too fixated on rising interest rates because companies can adjust, they can make those adjustments.
Travis Hoium: They have a different structure in some of their stuff is really short-term financing as well, so they will do a two or three-year financing project for like inefficiency deal, and so that's not quite like Brookfield is locking something in for 25 years, so your interest rate risk is a little bit different.
Tyler Crowe: Don't underestimate the power of being able to issue green bonds which get significantly lower interest rates. European green bonds can sell for less than one percent coupon rate but based on demand for bonds, so there's a lot of opportunity there.
