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Even with the UK stock market reaching new record highs lately, there are still plenty of FTSE shares offering generous dividend yields. And if these payouts can be maintained, investors could go on to earn an absurd amount of passive income.
That’s what’s brought Greencoat UK Wind (LSE:UKW) back in my sights. Renewable energy stocks continue to be unpopular in 2026. But new evidence is emerging that Greencoat shares could be a phenomenal long-term opportunity. And if that’s the case, its 10.6% payout could pave the way to exceptionally lucrative results.
So, is now the right time to go against the crowd and aim to earn a massive passive income?
Why is the yield so high?
Despite hiking its dividend by more than 130% since its IPO, Greencoat’s double-digit dividend yield stems from a painful fall in Greencoat’s share price.
Down around 35% since the start of 2023, the shares now trade at a 26.6% discount to net asset value (NAV). And to be fair, there are some valid concerns to justify this large discount.
In April this year, the Renewable Obligations (RO) scheme will be switching its inflation index from the retail price index (RPI) to the consumer price index (CPI). While CPI is a generally more accurate measure, it’s also often 1% to 2% lower than RPI, resulting in a significant reduction in long-term subsidy revenue for green energy generators.
At the same time, with more energy capacity being added to the national grid, long-term power price forecasts have been steadily dropping, placing further pressure on Greencoat’s projected cash flow. Combining all that with some fairly weak wind speeds over the last few years, it’s not surprising to see investor sentiment sour.
A hidden buying opportunity?
Despite some valid criticisms, investor pessimism looks like it could be overblown.
The near-30% discount to NAV doesn’t align with what’s happening in the private markets. The fact that Greencoat’s recent asset sales have occurred at NAV is evidence of that. And it shows there is a real disconnect between perceived value and actual value.
This valuation gap is something management has already been taking advantage of. By systematically buying its own stock at a substantial discount, not only is the firm boosting the NAV per share, but it’s also opening the door to a higher dividend per share simultaneously.
What’s more, policy uncertainty surrounding the RO scheme is now resolved. Meanwhile, looking at the group’s performance in the final quarter of 2025, even wind speeds have also started picking up again, with energy generation coming in just 1.6% below budget versus 14% across the first half of the year.
So, where does that leave investors?
Fluctuations in wind speeds remain a persistent threat. And prolonged periods of calm weather could be catastrophic for Greencoat, particularly given its fairly leveraged balance sheet.
However, with the share price barely moving despite substantial policy uncertainty being removed from the equation, it’s hard not to be tempted by the double-digit yield. Even more so, given that dividends are still entirely covered by cash flow.
So, with a favourable risk-to-reward ratio, Greencoat shares could be worth mulling over. But it’s not the only high-yield opportunity on my radar today.
