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The hunt for dividend yield is pushing U.S. fund managers into an unproven new offshoot of the alternative energy industry.Yield companies – commonly called "yieldcos" – are spinoffs of alternative energy companies that own assets such as wind or solar farms and pay investors dividends out of the cash flow generated by long-term contracts to sell power to utility companies. Since it began trading in July 2013, approximately a dozen yieldcos have begun trading on U.S. exchanges, including Nextera Energy Partners, TerraForm Power and Abengoa Yield, with each offering dividend yields of approximately 4 percent or more. In most cases, the parent company retains an ownership stake of 70 percent or more in the spinoff. A dividend yield is a ratio that shows how much a company pays out in dividends relative to its share price, so that a company with a share price of $20 and a dividend of $1 has a dividend yield of 5 percent. Abengoa Yield, a spinoff of Spanish energy construction company Abengoa, has dropped 14 percent, compared with its parent company's 23 percent drop.Based on conversations with Abengoa Yield, he expects the company to raise its annual dividend payout to $1.68 per share from its current $1.04 per share by 2016, which would increase its dividend yield to nearly 6 percent from its current 3.2 percent, based on its current share price.
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