RE Royalties: A High-Yield Renewable Energy Royalty Play with a Non-Dilutive Edge

For income-focused investors seeking a blend of stability and growth, RE Royalties (TSXV: RE, OTCQX: RROYF) stands out as a compelling case in the renewable energy royalty sector. With a forward dividend yield of 9.20% and a three-year average growth rate of 13.89%, the company has carved a niche as a consistent dividend payer while leveraging a non-dilutive business model to fuel long-term capital appreciation. Let's dissect the drivers behind its appeal.

Dividend Consistency: A Track Record of Stability

Since 2020, RE Royalties has maintained a disciplined quarterly payout of $0.01 per share, translating to an annualized $0.04 dividend. This consistency is rare in high-growth sectors, where volatility often deters income investors. The most recent ex-dividend date on April 30, 2025, underscores the company's commitment to predictable returns.

What's particularly striking is the alignment of this payout with the company's revenue streams. Over 100 royalties across solar, wind, hydro, and battery storage projects generate recurring cash flows, insulating the dividend from the cyclical risks that plague traditional energy plays. For context, RE Royalties' dividend yield dwarfs the S&P 500's average of ~2% and rivals high-yield REITs, all while operating in a sector with structural tailwinds from global decarbonization.

Non-Dilutive Model: Preserving Shareholder Value

At the heart of RE Royalties' strategy is a non-dilutive business model that avoids issuing equity to fund growth. Instead, the company finances renewable energy projects through secured loans and revenue-based royalties, earning a percentage of future project revenues without sacrificing ownership stakes. This approach ensures that capital is allocated efficiently, with minimal dilution for existing shareholders.

For example, in 2025, RE Royalties closed an $8 million secured loan to Revolve Renewables for a 9.6 MW wind project in the U.S. The deal includes a 12% interest rate and a 5% royalty on gross revenues for the project's lifetime. Such structures not only enhance returns but also diversify the company's revenue base. As of 2024, its portfolio spans 10 jurisdictions, including North America, Europe, and the Maldives, with projects ranging from 4 MW solar parks to 40 MW wind farms.

Portfolio Diversification: Mitigating Risk, Maximizing Returns

Diversification is a cornerstone of RE Royalties' strategy. Its portfolio spans multiple technologies (solar, wind, hydro, battery storage) and geographies, reducing exposure to regional or technological downturns. For instance, the company's 78 MW Texas Solar Park and 40 MW Nova Scotia Wind Portfolio generate stable cash flows from different energy markets and regulatory environments.

Moreover, the company's recent acquisitions of SPOBOC and SPOSOC—adding 5.3 MW of battery storage and a 428 kW solar project in Ontario—highlight its ability to scale operations organically. By acquiring operating subsidiaries rather than greenfield projects, RE Royalties minimizes development risks and accelerates revenue generation.

Strategic Financing: Green Bonds and Secured Loans

RE Royalties' strategic use of Green Bonds further cements its position as a sustainable yield generator. The company's Series 4 Green Bonds, issued in late 2024, raised $6.219 million to fund renewable energy projects. These bonds, secured against the company's royalty and loan portfolio, offer investors a 9% annual interest rate with a 2029 maturity date.

The proceeds are allocated to projects that align with the ICMA Green Bond Principles, such as battery storage systems and solar farms. For example, Series 1 and 2 Green Bonds allocated 56% of funds to energy storage—a sector poised for explosive growth as grid stability becomes a priority. This disciplined capital allocation ensures that RE Royalties' investments are not only profitable but also aligned with global decarbonization goals.

Risk Management: A Conservative Approach

Despite its aggressive growth, RE Royalties maintains a conservative risk profile. The company proactively provisions for credit losses on loans, such as the OCEP and Delta projects, and engages in refinancing discussions to mitigate defaults. This prudence is reflected in its ability to maintain a strong balance sheet, even as it expands its portfolio.

For instance, the early repayment of the Revolve Renewable Power Corp. loan in February 2025 allowed RE Royalties to reinvest capital into new opportunities, demonstrating the flexibility of its non-dilutive model. Such agility is critical in a sector where regulatory and technological shifts can disrupt cash flows.

Investment Thesis: A Win-Win for Income and Growth

RE Royalties' combination of high yield, non-dilutive growth, and strategic diversification makes it an attractive play for long-term investors. The company's 9.20% forward yield is supported by a robust cash flow base, while its renewable energy royalty model positions it to benefit from the $2.2 trillion global clean energy investment trend.

For those seeking capital appreciation, the company's recent $8 million wind project loan and its Green Bond offerings signal a strong pipeline of accretive investments. With over 100 royalties and a focus on compounding returns through royalty-plus-loan structures, RE Royalties is well-positioned to outperform traditional dividend stocks.

Final Take: A High-Yield, Low-Risk Opportunity

In a market where high yields often come with high risk, RE Royalties offers a rare combination of stability and growth. Its non-dilutive model preserves shareholder value, its diversified portfolio mitigates risk, and its strategic financing strategies ensure sustainable returns. For income-focused investors willing to ride the renewable energy wave, RE Royalties presents a compelling case to consider.