In this clip from "The High Energy Show" on Motley Fool Live, recorded on Feb. 8, Motley Fool contributor Jason Hall explains why investors should look at cash flow instead of earnings in valuing the renewable energy giant.
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Jason Hall: There's a few questions in here about Brookfield (BEPC 0.09%). I'll hit those real quickly here. Brookfield Renewable (BEP 0.19%). There are two tickers. There's BEP, which is Brookfield Renewable Partners, which is the publicly traded partnership, which come with different tax implications than BEPC, which is the corporation. They're one-for-one. A share of each is economically the same investment. You get the same dividend that they pay. In general, partnerships are not great to own inside retirement accounts because of something called unrelated business taxable income, UBTI, which can result in potential taxes you have to pay in a retirement account. But Brookfield says, in their FAQ on their Investor Relations website, they say they don't pay UBTI. The risk of it is very low because it's only tied to one revolving credit instrument that they have that's like an emergency release valve. They say it's eligible to own Brookfield Renewable Partners in retirement accounts. Generally, BEP trades at a lower price. That means you can get a better yield by owning BEP. Generally, I suggest for most folks, that's what I try to do. Every once in a while, Brookfield Renewable Corporation trades for a good price compared to Brookfield Renewable Partners. How do I value it? Again, you don't look at earnings. Funds from operations [and] distributable cash flow are a little more important than earnings per share because big depreciation tied to those assets and those assets are good for decades. The land asset itself is going to appreciate in value. It's not like a factory where they're going to have to replace the equipment in five years, so those depreciation means future CapEx is tied to it. Travis, it changes the metric a little bit to how you think about earnings. It's really more about looking at the cash flows.
