Source: 8Point3 Energy Partners.

The market is off to a rough start in 2016, and I couldn't be happier. That's because Wall Street's fear and pessimism are presenting wonderful opportunities for long-term dividend investors to load up on high-quality companies at severely undervalued prices. One such opportunity lies in my favorite solar income stock, 8Point3 Energy Partners (NASDAQ: CAFD). Let's look at three reasons this 5.7% yielder potentially deserves a spot on in your diversified dividend portfolio.

Market undervaluing a great business model

CAFD Chart
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Largely because of crashing energy prices (that Wall Street seems to think threatens to slow adoption of solar energy in the long term), 8Point3 Energy Partners has had a rough few months since its IPO.

However, as usual, the market's short-term focus is blinding it to the immense long-term potential of this yieldco.

That's because 8Point3 Energy's business model is that of a pure solar utility. Its two sponsors, managers, and general partners, First Solar (NASDAQ: FSLR), and SunPower Corp. (NASDAQ: SPWR), are some of the largest and best-capitalized solar companies in the world. They drop down or sell 8Point3 Energy completed solar projects only after they have secured extremely long-term power purchase agreements or PPAs with some of America's largest and most creditworthy utilities.

In fact, 8Point3 Energy's initial 432 MW portfolio of solar projects has its cash flows secured by a weighted average contract length of 22 years, with some of its contracts extending out to the end of 2043.

With such secure cash flows secured, 8Point3 Energy Partners plans to pay out a generous and growing distribution to investors, one that has the potential to generate extremely attractive total returns over the coming years.

Payout profile signaling sustainability and strong growth ahead
Dividend investors are attracted to electric utilities because of their generous (if slow-growing) dividends backed by highly predictable and recurring cash flows. In the third quarter, 8Point3 Energy generated $6.7 million, or $0.34 per share, in cash available for distribution (CAFD), which is what funds the quarterly payout.

That gives the yieldco a distribution coverage ratio (DCR) of 1.54, even taking into account its recently announced 3.5% distribution increase for the fourth quarter of 2015.

Keep in mind that 28% of the yieldco's solar projects were completed just recently, and so the cash flow from these projects wasn't represented in last quarter's financials. Thus, 8Point3 Energy's DCR is likely to be even stronger in the upcoming quarter. This is what gives me such confidence in management's distribution growth guidance of 12%-15% CAGR into 2018.

Immense growth potential backed by sponsors' massive project backlog

Source: 8Point3 Energy Partners investor presentation.

Here you can see the immense growth potential that 8Point3 Energy Partners processes thanks to its sponsorship by First Solar and SunPower. Note that management's distribution growth guidance is based purely on the yieldco's backlog of right-of-first-offer projects, which represents just 8.7% of First Solar and SunPower's total solar development pipeline.

Given that Congress recently extended the full 30% solar investment tax credit through 2019, it's likely that this total backlog will only grow larger over the coming years. This could greatly extend the length of time that 8Point3 Energy can continue growing its payout at impressive rates.

Risks to be aware of
There are two long-term risks current and potential investors in 8Point3 Energy need to keep in mind.

First, while a cheap share price may be great for investors from the perspective of locking in a higher yield, yieldcos rely on both debt and equity growth funding to grow through acquisitions of new projects from their sponsors. Thus, should energy prices stay low or even drop further 8Point3 Energy's share price may decline to a point where it can't tap equity markets to fully fund its massive growth potential.

A longer-term threat is that, as solar technology continues to improve and the cost of solar power falls in the decades to come, when the yieldco's existing PPA contracts expire, the renegotiated power rates it's able to get from utilities (as well as rates for future acquisition contracts) may be lower than today's levels. 

Bottom line
I'll admit that 8Point3 Energy Partners' long-term business model has some risks. However, in my opinion, at today's undervalued levels I think long-term dividend investors are well compensated for these uncertainties. As part of a well-diversified income portfolio, 8Point3 Energy should make investors a potential killing as the global solar boom continues over the next several decades.