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Why Brookfield Renewable Surged More Than 15% in September

By Matthew DiLallo – Oct 6, 2020 at 10:05AM

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The renewable energy giant sees lots of growth ahead.

What happened

Shares of Brookfield Renewable Partners (BEP -1.96%) (BEPC -3.45%) jumped more than 15% in September, according to data provided by S&P Global Market Intelligence. Powering the renewable energy stock's surge was an update on its growth prospects. 

So what

In late September, Brookfield Renewable unveiled a renewable energy supply deal with hydrogen engine and fuel solutions provider Plug Power. Brookfield agreed to provide Plug Power with renewable energy to meet 100% of its planned green hydrogen production plant's power needs. They're also in discussions on a broader strategic relationship to pursue additional green hydrogen opportunities, which could be a massive growth market in the coming decades. 

Wind turbines in a field with the sun setting in the background.

Image source: Getty Images.

Brookfield Renewable also held its annual Investor Day in late September. One of the key takeaways is that the company expects to deliver significant earnings growth over the next five years. It anticipates organically growing its funds from operations (FFO) per share at a 6% to 11% annual rate, powered by inflation escalators in its existing contracts, margin enhancement efforts, and development pipeline. The company has been actively acquiring development-stage projects over the past year, especially in solar, increasing its organic growth clarity. Meanwhile, the company anticipates additional acquisitions will provide an extra 4% to 5% annual boost to its bottom line. Add it all up and Brookfield should generate double-digit annual earnings growth, which should easily support its plan to continue growing its 3.7%-yielding distribution at a 5% to 9% annual rate.

Now what

Brookfield Renewable is leading the charge toward renewable energy. Because of that, it has lots of growth potential, which it reminded investors of last month. While that caused its stock price to surge, it still should be able to generate attractive total returns, especially when adding in its fast-growing high-yield dividend.

Matthew DiLallo owns shares of Brookfield Renewable Inc. and Brookfield Renewable Partners L.P. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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