A current high yield isn’t the only thing to look for in a dividend stock. In fact, it’s possibly not even the best thing. But when we see a forecast 8.9% for 2026, rising to 9.6% by 2028, it’s got to be an important factor, right? That’s how the analyst consensus looks at the moment for Greencoat UK Wind (LSE: UKW), the investment trust investing in UK wind farms.
But wait, weren’t we looking at forward yields over 10% not so long ago? Yes, we were. But there’s no need to worry, nothing bad has happened. In fact, the trend appears positive, and it looks like investors are starting to take notice…
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Market waking up?
Since a 52-week low of 92.2p in February, the Greencoat share price has climbed 27% to 120p at the time of writing. And that’s the only thing I can see behind these slightly-reduced dividend yields.
At first-half results time in July, the company reiterated its full-year dividend target of 10.7p per share. And if that comes off, it would represent 13 straight years of inflation-linked rises. And it looks like the cash was there to cover the halftime dividend comfortably…
Net cash generation by the group and wind farm SPVs [special purpose vehicles] was strong at £221.6 million with dividend cover for the period of 1.9x, further demonstrating the enduring strength of the group’s cash generation profile.
H1 results, 30 July 2026
So with such big dividends on offer, why weren’t investors snapping up the shares and pushing the price up a lot sooner?
Sustainability risk
I’d rate the income outlook for Greencoat up with some of the best UK dividend stocks — in the short term. Looking beyond that, some things could knock back the board’s ambitious plans.
Aggregate debt fell £56m at the 2026 halfway stage — but was still over £2bn. The market cap isn’t much higher at £2.6bn. And total net asset value was only a bit more again at £2.9bn. The balance between asset values and debt could make a big difference to the ability to keep these dividends going.
Shareholders also have to contend with energy prices, government policy on renewables, subsidies, and asset lifetimes. Wind turbines operate under significant stress. And the cash needs to be there to maintain and eventually replace them.
What should investors do?
Greencoat’s big forecast dividends are far from guaranteed. In fact, I see a significant chance of its long spell of annual increases being tricky to maintain.
But I also think the high yield could provide a decent safety buffer to help accommodate any medium-term reductions. And the stock could be a top one to consider tucking away in an income-focused Stocks and Shares ISA. Reinvesting the dividend cash could compound up nicely.
Greencoat UK wind is on my shortlist for my next ISA investment. It’s vying with some stiff competition for my cash, mind. And that includes…
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Alan Oscroft does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
