The UK is home to hundreds of quality dividend stocks. And even though valuations have generally increased this year, all FTSE350 voters were so lucky. Actually, Prospective solar fund (LSE:FSFL) is now one of the most profitable income stocks in the index after its shares fell nearly 20% since the start of 2024.

Foresight Solar shareholders have actually been stuck on a downward trajectory since late 2022. And that’s not really surprising, given that that’s also around the time the impact of rising interest rates began to be felt. Since the company carries a lot of debt on its balance sheet, higher interest charges certainly warrant some concern. But now that interest rates are falling again, does the currently depressed valuation present a buying opportunity?

What’s going on with Foresight Solar?

As the impact of climate change becomes increasingly evident, the demand for clean energy sources continues to increase. More recently, this trend has accelerated as electric vehicles and big-language AI models continue to be deployed around the world. And this is a tailwind that Foresight Solar has been capitalizing on for many years.

As its name suggests, the group has a diverse portfolio of solar farms spread across the UK. It also has some assets in Europe and Australia, but management is in the process of selling these to refocus the portfolio. Regardless, the continued need for electricity has provided the cash flow needed to provide a growing dividend. And so far, shareholders have benefited from nine straight years of dividend hikes.

However, given the group’s latest results, the surge in demand does not seem to translate into financial growth. In the first six months of 2024, operating revenue fell from £92.2 million to £74.5 million, with EBITDA falling from £79.1 million to £60.6 million of pounds sterling.

There are a few factors at play. Electricity prices have normalized, creating some pricing difficulties. However, the biggest problem is simply bad weather. The first half of 2024 saw some of the “the worst weather conditions in the history of the fund”preventing the solar sector from maximizing its production capacity.

A buying opportunity?

Bad weather is frustrating and completely out of management’s control. And it’s a risk factor that will persist and may even get worse as climate change continues. However, from a financial perspective, Foresight Solar stock appears to have been punished too much by investors.

Today, the dividend stock trades at a 28% discount to its net asset value, although earnings remain on track to support another dividend hike by the end of 2024. In the meantime, proceeds from the sale of Australian assets are allocated to debt reduction in 2025, strengthening the group’s dynamics balance sheet health once market conditions improve.

In my opinion, this suggests that a buying opportunity may have presented itself for my portfolio. And it appears management agrees, given that they’ve been busy buying back shares. In fact, the company’s share buyback program was recently extended to buy back a further £10 million, bringing the total to £50 million.

With exposure to renewable energy already in my portfolio, I’m not rushing to buy Foresight Solar stock. But it’s definitely a profession that I’m more interested in.