This Stock Offering Yielding 4.5% Continues to Generate Robust Development
Brookfield Renewable Energy (BEPC at 2.24%, BEP at 1.59%) is a unique investment prospect. This prominent global producer of renewable energy delivers substantial income and growth to investors. With an approximate 4.5% yield, it surpasses the S&P 500's 1.5% dividend yield. Furthermore, it's showing double-digit growth in earnings.
This renewable energy dividend stock is anticipated to keep growing rapidly. Alongside its expanding and increasing dividend, Brookfield Renewable is poised to generate impressive total returns over the approaching years.
Impressive growth
During its third quarter, Brookfield Renewable announced substantial financial results. The company generated $278 million, or $0.42 per share, in funds from operations (FFO), which is nearly an 11% increase from the previous year. Its success was attributed to strong electricity prices, recently completed development projects, and favorable acquisitions.
Brookfield's long-standing hydroelectric fleet continues to yield impressive results. The company has seen a steady demand for the clean energy it produces through its hydroelectric facilities. This led to the signing of two beneficial contracts with U.S. utilities during the quarter. These contracts also provide an added cash flow boost.
Meanwhile, the company is pouring resources into expanding its wind and solar energy platforms. Brookfield added 1.2 gigawatts (GW) of new renewable energy capacity during the quarter and is on track to complete a record 7 GW of projects this year. These additions increase its earnings and provide new cash flow sources.
Brookfield also continues to invest in new opportunities. It deployed or committed to deploying $2.3 billion during the third quarter ($500 million of which it will directly fund). It's on track to invest a record of over $11 billion this year ($1.5 billion of which it will directly fund). Its recent investment was purchasing an interest in some operational U.K. offshore wind farms (a $570 million direct investment). These new investments also contribute to additional sources of FFO.
More growth to come
As stated by CEO Connor Teskey in the third-quarter earnings report, "Given our strong results year to date and our outlook for the remainder of the year, we continue to expect to achieve our 10%+ FFO per unit growth target for 2024." This continued success will stem from strong electricity prices, development project completions, and beneficial new investments.
The company projects its FFO per share to grow by more than 10% annually for several years. It has secure growth plans through 2029, with increasingly secure growth schemes through 2034.
For example, the company has more than 6,000 gigawatt hours of hydroelectric generation that can be renewed over the next five years. With the increasingly positive market environment for clean energy, it anticipates signing higher-tier power purchase agreements for this capacity as legacy contracts expire, generating additional FFO in the coming years.
In addition, Brookfield is rapidly scaling its development activities. It projects delivering 8.4 GW of new capacity in the next year and 9.1 GW in 2026. Its growth may further accelerate in the future, powered by contracts to supply power to technology companies. It has already agreed to provide Microsoft with more than 10.5 GW of new renewable energy capacity between 2026 and 2030.
Lastly, Brookfield's capital recycling strategy will keep boosting its growth rate. The company has agreed to sell over $2.3 billion of assets this year ($1 billion net to its balance sheet), giving it capital to invest in higher-return opportunities. It also plans to continue selling select assets to improve its financial flexibility. Regardless, the company continues to find new investment possibilities. It currently has a formidable pipeline of merger and acquisition opportunities valued at over $100 billion.
High-yielding total return potential
Brookfield Renewable projects its FFO per share to grow by more than 10% annually for the next decade. Its expanding development pipeline and escalating demand for clean energy provide increasing confidence in this outlook. This growth will allow it to keep increasing its high-yielding dividend, which it aims to grow at a 5% to 9% annual rate.
All in all, Brookfield could generate annual total returns in the mid-teens. This makes it an appealing long-term investment opportunity.
Investors looking to capitalize on this growth might consider allocating their money towards Brookfield Renewable's shares, as the company's financial strategy emphasizes investing in new renewable energy projects and capital recycling.
Brookfield's investment in wind and solar energy platforms, along with its capital recycling strategy, is expected to provide steady income and growth for investors, offering a high-yielding total return potential.
