Dividends and growth? It is possible! With RE Royalties, Royalty Pharma or Evonik

Evonik scores with its business model and dividends

When German investors seek stable returns from domestic companies, they often turn to Evonik shares. The specialty chemicals group offers a wide range of chemical products and is therefore considered stable within what is actually a cyclical industry. Evonik pursues a consistent dividend policy and has never reduced its dividend payout since going public more than ten years ago. Today, Evonik shares offer a stable dividend yield of around 8% – placing the Company at the top of the MDAX dividend ranking. The combination of a stable business model and a consistent dividend policy appeals to many investors. Analysts are also relatively optimistic about Evonik.

Royalties almost mask the economic cycle – More and more exciting niches

Business models that rely on so-called royalties promise even more stable earnings. Royalties are steady income streams in the form of usage or license fees, as is common in mining or the pharmaceutical industry, for example. Founded in 2000, Royalty Pharma is now the world's largest buyer of drug royalties. The business model: Royalty Pharma provides capital to biotech companies and pharmaceutical developers – for example, for research financing or acquisitions – and in return receives contractually secured revenue shares from approved drugs. These royalty streams bring capital into the coffers completely independently of the economic situation. The large number of royalties also ensures a diversified cash flow pool. Royalty Pharma's stock fluctuates significantly less than others; the Company consistently buys back its own shares and also offers a quarterly dividend. In the rather hectic biotech business, the Company occupies an interesting niche.

RE Royalties finances clean energy – and scores with a 9% dividend

The Canadian company RE Royalties is also unique in its approach. The specialists in financing sustainable energy projects raise capital through bonds and invest it in selected projects in the fields of solar, wind power, hydropower, and battery storage. In return, the operators guarantee RE Royalties regular payments. RE Royalties currently offers a diversified portfolio with over 100 projects from more than ten jurisdictions and various technologies. This generates robust cash flows that ensure the Company can guarantee a stable dividend. Since 2020, RE Royalties has been paying a quarterly dividend of CAD 0.01 – based on the current share price and annualized, this results in an extremely attractive dividend yield of around 9%.

For bond investors, RE Royalties also offers green bonds: The Company has already issued several green bonds to finance new projects. At the end of 2024, it raised around CAD 6.2 million, paying investors a coupon of 9% per annum until maturity in 2029. The bonds are secured by the royalty and loan portfolio and are earmarked for verifiably sustainable investments in accordance with the ICMA Green Bond Principles. As S&P Global has positively reviewed the green bond framework, interested investors can also take a look at these bonds. A combination of shares and bonds can also be attractive depending on market conditions - despite RE Royalties' long-standing track record, the Company, with its innovative business model, is still not widely known among investors. Valuation anomalies that savvy investors can exploit are therefore quite possible.

Stability anchor for your portfolio: RE Royalties shares and green bonds

While royalty companies have long been present in the energy and mining sectors, RE Royalties occupies an interesting niche with its royalties from renewable energy plants. This means that the Company faces little direct competition when issuing bonds and can offer attractive terms. The possibility of debt financing also prevents shareholder dilution, making the stock even more appealing. Even though RE Royalties' stock has lost 6.5% over the past six months, this has been more than offset by its stable dividend. The growth outlook is also promising: according to the International Energy Agency (IEA), around USD 2.2 trillion will be invested in clean energy technologies in 2025, which is twice as much as in fossil fuels for the first time.

With its expertise in renewable projects and the associated financing, RE Royalties offers an exciting investment story for all investors looking to add a stable and sustainable position with the prospect of further returns to their portfolio. The bonds are also worth considering for investors familiar with the asset class or for professional investors.