RNW

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Thoughts on RNW? It is up about 35% since I bought it. Liked the company but now not so sure about the ROE of 3.9%. I was planning on keeping long term.

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Asked on December 30, 2020 10:43 am
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Hi there,

One of the issues with using a simple ROE as longe metric is that it doesn't tell the full story. While an ROE of 3.92% is low, it is actually better than Renewable competitors BEP.UN, INE and BLX. Furthermore, if you look at ROE over the past decade, it is at the mid-range. So that in of itself, isn't all that big of a concern.

In terms of valuation however, it is getting up there in price. Granted the entire renewable industry is trading at very high valuations. In fact, I did a quick search on a handful of renewables (RNW) included and every single one is trading well above historical averages. Now, this isn't necessarily a bad thing. It could simply be a sign of a faster shift to renewables than previously expected.

Of note, I own RNW - have for years and have gone through ups and downs. Like you however, I intend to hold for the long-term and have confidence in the long-term prospects of the company. Furthermore, despite a period of stagnation I was always paid handsomely through a dividend that I deemed to be well covered by cash flows. Sure enough, they have never cut the dividend and it remains well covered.

Mat

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Posted by Mathieu Litalien
Answered on December 30, 2020 1:17 pm