Yield co
A yield co or yieldco is a company that is formed to own operating assets that produce a predictable cash flow, primarily through long term contracts. Separating volatile activities (such as development, R&D, construction) from stable activities of operating assets can lower the cost of capital. Yield cos are expected to pay a major portion of their earnings in dividends, which may be a valuable source of funding for parent companies which own a sizeable stake.Yield cos are commonly used in the energy industry, particularly in renewable energy to protect investors against regulatory changes. They serve the same purpose as master limited partnerships (MLPs) and real estate investment trusts (REITs), which most utilities can't form due to regulatory constraints. Yield cos give investors a chance to participate in renewable energy without many of the risks associated with it.The number of yield cos grew rapidly in 2013 and 2014 through initial public offerings.