A flurry of bullish price target revisions has propelled Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI) into the spotlight. Initially pressured lower in 2023, the stock has seen a swift reversal in fortunes, with six price target upgrades since the start of the year. The latest revision on May 13th by TD Cowen set a bold new target of $40, well above the consensus of $33. This surge in positive sentiment followed a robust Q1 performance, propelling the stock onto Marketbeat’s prestigious list of Top Rated Dividend Stocks, underscoring its value and yield.
Ranked 84th on the dividend stock screen, HASI boasts a solid rating of 2.75, with eight analysts advocating a Moderate Buy stance. Projections suggest the stock could see gains of 5% to nearly 45%, a target set more recently. Notably, HASI trades at a P/E of 12X, signaling strong growth potential. Comparatively, its yield surpasses that of competitors, offering investors a dividend of 5.2% with a promising trajectory for further growth.
While distributions have been steady, the pace is expected to quicken in the coming years. Hannon Armstrong anticipates 8% to 10% EPS growth over the next three years and aims for a dividend payout ratio between 60% and 70%. Although the current TTM payout ratio hovers around 80%, it is slated to drop to approximately 65% by year-end, paving the way for a potential mid-to-high-single-digit increase in the following year.
The Evolution of Hannon Armstrong Sustainable Infrastructure Capital
Hannon Armstrong Sustainable Infrastructure Capital is a trailblazer in investing across various vehicles, including debt and equity, to drive revenue and income for shareholders, all while making a positive impact on the environment. The company’s initiatives have significantly reduced CO2 emissions by 6.6 million metric tonnes and water usage by 6.3 billion gallons annually, benefiting over 300,000 children through energy-efficient upgrades to schools and transportation infrastructure.
Established in 1981, the company previously operated as a REIT before relinquishing that status this year to sharpen its focus on investment objectives. This shift will have minimal implications for investors beyond changes in dividend reporting and distribution. As a C-Corporation now, Hannon Armstrong is subject to taxation, relieving investors of pass-through liability concerns. Moreover, the company has more flexibility in dividend payments, targeting a sustainable payout ratio of 60% to 70% alongside robust earnings growth.
Hannon’s Growth Surge in Q1
Q1 proved to be a stellar quarter for Hannon Armstrong Sustainable Infrastructure Capital, with significant double-digit growth across all key metrics. Net revenue surged to $105.8 million, underpinned by a remarkable 60% rise in interest income driven by a 36% spike in the portfolio size and a 24% increase in assets under management. Although GAAP NII saw a dip due to an accounting adjustment, adjusted results surged by 37% and are poised for sustained strength.
Post-Q1 earnings, HASI shares staged an impressive comeback, soaring nearly 25% in a week on robust volume, marking a multi-year high. This surge has positioned the stock above crucial resistance levels, setting the stage for a potential reversal in fortunes. Investors now have a promising risk-reward scenario, with strong support at the lower end of the range, compelling valuations, and a dividend that mitigates downside risks. If the company continues on its growth trajectory and fulfills its forecasts, the stock price could witness a significant uptick driven by multiple expansion in the years ahead.
This article first appeared on Market Beat
