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Enviva Offers A 7.2% Dividend With Steady Growth, But May Be Overvalued

Published Thu, 15 Oct 2020 14:15:29 -0400 on Seeking Alpha

Seeking AlphaEnviva Offers A 7.2% Dividend With Steady Growth, But May Be OvervaluedOct. 15, 2020 2:15 PM ET|| About: Enviva Partners, LP (EVA)by: Harrison SchwartzHarrison Schwartz Conviction DossierMaximize returns and minimize risks with a powerful multi-asset strategy.SummaryEnviva Partners offers investors the rare opportunity to invest in the rapidly growing wood-pellet biomass energy industry.
Enviva has rapidly expanded operations over the past decade which has created steady EPS growth that is expected to continue over the coming years.
Most demand comes from Europe where wood biomass is viewed as one of the best 'renewable' alternatives to coal.
While Enviva will likely continue to grow, the backlash against the industry is growling too which may eventually upend its "green energy" status.
EVA offers many attractive niche qualities, but it is at the high-end of its historical valuation range.
Many investors are interested in limited partnerships due to their high dividend yields and diversification value. However, many avoid them since most MLPs are in the fossil fuel industry which has seen abysmal performance over the past few years. That is, except for a few like Enviva Partners (EVA) which is a renewable wood energy producer.
As you can see below, EVA has outperformed the MLP ETF (AMLP) by a wide margin over the past few years:
Data by YCharts
EVA has had very strong returns and, though it is correlated to AMLP, has been a far better investment. This is due to the fact that demand for wood pellets is more stable and there has been a growing interest in renewable energy investing. Despite its strong performance, EVA still pays a very attractive dividend yield of 7.2%, making it among the few reasonably priced "green" investments. However, a growing backlash against the wood-burning industry may change its growth trajectory.
The 'Green' Wood-Pellet Energy Niche
Enviva is a wood bioenergy company that produces... Read more