I Love Brookfield Renewable for 1 Reason, and It’s Not the Dividend
The income draws investors in, but the growth story is what makes Brookfield Renewable so attractive.
Many investors choose to own Brookfield Renewable (BEPC +2.63%)(BEP +2.01%) primarily for its dividend. The stock offers a solid 5% yield and a remarkable track record of delivering at least 5% annual dividend growth over 17 years, making it a high-quality income investment. However, the dividend is not the primary reason I appreciate this renewable energy stock.
What truly entices me about Brookfield is its impressive growth rate, which greatly amplifies its total return potential. Recently, the company disclosed its third-quarter results, revealing that it generated $0.51 per unit of funds from operations (FFO), marking an 11% year-over-year increase. Over the past year, Brookfield's FFO per unit has grown by 12%, a stellar performance for a company boasting a 5% dividend yield.
The company's growth is underpinned by several factors, including inflation-linked rate hikes, expanding margins, ongoing development projects, and its strategic capital recycling approach. Brookfield has recently allocated approximately $700 million to acquire two new businesses, Boralex and Aypa, financed by $850 million in asset sales.
Furthermore, the company has deployed 5.6 gigawatts (GW) of new renewable energy capacity so far this year. These investments are poised to fuel continued growth. Brookfield projects that it will deploy over $11 billion in capital over the next five years. It is expanding its renewable energy development capabilities, with 10 GW expected to be delivered next year and 11 GW by 2028, while also pursuing strategic M&A transactions.
These and other growth catalysts suggest that Brookfield expects to deliver more than 10% annual FFO per share growth moving forward. When combined with its 5%-yielding dividend, Brookfield's total returns could potentially reach 15% annually. While the company's high-yielding dividend is certainly attractive, its robust growth rate is what truly positions Brookfield to deliver exceptional total returns in the years ahead.
For those seeking to enhance their investment portfolios, considering Brookfield Renewable's strong growth prospects alongside its appealing dividend could be a wise choice.
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