Brookfield Renewable Partners (BEP 1.92%) has an excellent track record of rewarding its investors. Since its formation in 1999, the renewable energy producer has grown its distribution at a 6% compound annual rate, which includes a 5% increase this year. That upward trend appears poised to continue given the amount of growth the company has up ahead, which was one of the central themes on its fourth quarter conference call.
A powerful year
Brookfield Renewable was very active strategically last year. CEO Sachin Shah stated on the call that "we invested $2 billion, or $550 million net to BEP, of equity across 9 transactions, including doubling the size of our Asian and distributed generation businesses, adding a leading global solar developer, and investing in a hydro portfolio in Canada."
These new additions helped power a 13% year over year increase in the company's funds from operations (FFO) on a per-unit basis. That allowed it to "continue our track record of strong FFO per unit growth at a 10% annual growth rate since our strategic combination with Brookfield's renewable assets in 2011," according to Shah.
One thing that was noteworthy about some of Brookfield's recent deals is that they came with the embedded upside of future development. The most notable one was the acquisition of a 50% interest in X-Elio, which is a leading solar power project developer.
Shah noted that "with this acquisition, we have significantly enhanced our solar development capabilities, adding 970 megawatts (MW) of operating assets and almost 6,000 MW to our global construction and development pipeline." Meanwhile, the company also signed agreements to acquire 14 solar development projects in Brazil for $30 million, adding another 428 MW of capacity.
Because of these deals, the company has significantly expanded its organic growth profile. Shah pointed out that "we commissioned 50 MW of new capacity, progressed approximately 2,000 MW through construction and advanced stage permitting, and increased the size of our development pipeline to approximately 13,000 MW." To put that size into perspective, the company ended the year with an operating portfolio of about 19,000 MW of renewable generating capacity.
Working on an accelerator
Brookfield expects to invest about $1 billion over the next five years into that development pipeline, which is part of its five-year plan to pour $4 billion into expanding its renewable energy portfolio. In the company's view, that investment level would grow its FFO by 9% to 16% per year. That suggests the company will spend about $600 million per year on acquisitions.
This investment level would be in addition to its recently proposed merger with TerraForm Power (TERP). Brookfield's CFO Wyatt Hartley made this distinction on the call by saying, "the TERP transaction should be thought of as separate" from its five-year strategy because the company sees it as a simplification deal to bring both companies under one umbrella. Because of that, if Brookfield does complete the deal -- which Shah noted would be "an immediately accretive transaction," -- it would enhance its already strong growth profile.
An ideal stock for dividend growth investors
With this year's distribution increase, Brookfield Renewable currently yields around 4%. However, as the company's management team made clear on the fourth quarter call, it has plenty of power to keep boosting that payout.
Not only does it have an excellent development pipeline, but it expects to continue moving the needle via acquisitions, including a potentially big deal that would be an addition to its five-year plan. Because of that, it's an excellent stock for investors who want a steadily growing income stream powered by renewable energy.