Finding good FTSE 250 income stocks isn’t as easy as some might think. It’s true the index has a higher average yield than the FTSE 100, but this doesn’t mean all companies with an above average yield are sustainable. Yet after doing some digging, I think I’ve found a good one. What are the details?

The lightbulb moment

I’m talking about the Renewables Infrastructure Group (LSE:TRIG). The stock’s down 9% over the past year, but has a dividend yield of 10.44%.

The group owns renewable energy projects, including on-shore and off-shore wind farms, along with solar parks spread across the UK and parts of Europe. Rather than building speculative projects from scratch, the firm mainly buys operating assets that are already producing electricity. That means investors are effectively buying a slice of a giant clean energy utility business.

The company then earns money by selling the electricity generated by those assets into the market. Some revenues are linked to wholesale electricity prices, while a large proportion comes from long-term government-backed subsidies and fixed-price contracts. That combination matters because it gives the company a relatively predictable income stream. This leads us nicely to the dividend.

A sustainable dividend

The group was designed from the outset to be an income stock. Management targets steady dividend growth and backs this up with assets that can generate cash over decades. Wind farms and solar parks may require upfront investment, but once operational their running costs are comparatively low. As a result, a large share of revenue can ultimately be returned to shareholders.

At the moment, the 10.44% yield makes it one of the most appealing options in the FTSE 250. Yet I think it’s sustainable as the dividend cover is 1, meaning earnings per share covers the dividend. This shows the company is paying funds within its means.

The long-term outlook also appears encouraging. Governments across Europe continue pushing aggressively toward energy independence. The recent conflicts around the world show policymakers how important domestic energy generation really is. I believe this makes renewable power (like the firm does) a strategic necessity.

At the same time, electricity demand could rise substantially over the next decade due to other factors such as electric vehicles and AI data centres. More demand for electricity is again supportive for renewable infrastructure.

Talking numbers

If someone invested £2k in the stock today, even without investing a penny more, this could accumulate over time by reinvesting the dividends. After 15 years, it could be paying out £938 a year. Granted, this may be too long for anyone to wait. In that case, aside from the £2k, adding an extra £200 a month could speed the process. In this scenario, it could take just three years!

Of course, there’s no guarantee of this, as the company could run into problems that lead to a dividend cut. If interest rates rise in the UK this year, it would raise financing costs for new projects, which could eat into profits. This is a risk going forward, but overall I think it’s a good income stock for investors to consider.

Should you invest £5,000 in Renewables Infrastructure Group right now?

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Jon Smith has no positions in the shares mentioned.