The biggest energy crisis in decades has sent oil and gas bills soaring but it is also powering renewable dividends, with Octopus and Greencoat both boosting income pay-outs.

Renewables enjoyed a surge in popularity during the pandemic as investors looked towards a greener future, but the real driver of returns came off the back of Russia’s invasion of Ukraine, which highlighted the urgent need to find new sources of power.

Octopus Renewables Infrastructure (ORIT ), the 5.4%-yielding £539m portfolio of UK and European wind and solar assets, has been a beneficiary of higher inflation, stoked by western economies cutting off Russian supplies.

This is most evident in its dividend payments; the fund has guided to a dividend of 5.79p for 2023, an increase of 10.5% over the 5.24p target for last year, and in-line with the consumer price index (CPI) rate of inflation despite not having a formal target to do so. The board is expecting the dividend to be fully covered by cashflows generated by the portfolio, with 53% of contracts to deliver energy in the portfolio being inflation-linked.

Phil Austin, chairman of the trust, said increasing the dividend target to match inflation, which hit four-decade highs last year, reflects ‘the positive progress made by the company to date’.

‘This has been driven by our diversified portfolio of assets, spanning seven countries and four technologies from which 53% of forecast revenues over the next 10 years are explicitly inflation linked,’ he said.

‘Along with our investment manager’s successful delivery of construction projects, the existing operational portfolio has allowed for 546MW of operational capacity to now contribute to ORIT’s dividend cover.’

Despite the strong dividend growth, and the fact that NAV has risen 13.4% over one year and 27.4% over three years, the trust is still sitting at a 15.6% discount versus a sector average discount of 7%.

Greencoat UK Wind (UKW ), the £3.6bn wind farm fund that currently yields 6.8%, also used its fourth quarter results to bolster its dividend. It saw its NAV jump 9.1% in the three months to the end of 2022 to 167.1p which allowed it to increase its dividend by 13.4% to 8.76p for the year, in line with its policy to increase distributions by the retail price index (RPI) rate of inflation.

The driver of its performance included a 20p per share uplift from updated power price assumptions, however this was moderated by the impact of the government’s electricity generator levy which reduced the NAV by 8p, while it also experienced lower wind resources than anticipated in the second half.

Numis investment trust analyst Gavin Trodd said he had expected a strong uplift to UKW’s NAV in the quarter ‘given the strong cashflow generated and the conservative power price assumptions that had been applied to its third quarter NAV compared to the market’.

However, he said the NAV increase was ‘likely to be an outlier’ and contrasted with the more modest decline in NAV over the same period from JLEN Environmental Assets (JLEN ).

The £819m fund reported a NAV decline of 0.9p to 123.3p per share in the last three months of 2022, while the NAV total return, which includes dividends paid, was 0.7%.

The trust said the disappointing result was due to ‘the net impact from a decline in near and medium-term power price forecasts provided by independent third-party consultants, operational gains from investment performance above expectations for the period, and an increase to the 2023 forecast rate of RPI to 6.5% reflecting an average of recent independent economic forecasts’.

The company paid a quarterly dividend of 1.78p per share, in line with its dividend target of 7.14p for the year.

Trodd said the broadly flat outcome was ‘not unexpected for JLEN’ given the assumptions the trust made in the previous quarter. The fund currently yields 5.9%. It enjoyed a strong 2022, however, with the shares up nearly 28% over one year including dividends.