The energy sector hasn't always treated dividend investors well. Volatile oil and gas prices have made it challenging for many energy stocks to maintain their dividends over the years. Meanwhile, with the global economy shifting fuel sources to cleaner alternatives, it's unclear whether many energy companies will be able to keep paying dividends in the decades ahead.
However, one energy stock that should have no problem delivering sustainable income to its investors is Brookfield Renewable (BEPC -1.24%) (BEP -0.86%). The company has a long history of paying a growing dividend, which should continue for years to come, given its leadership in renewable energy.
Sustainable income growth
Brookfield Renewable has delighted dividend investors over the years. The leading global renewable-energy producer delivered its 11th straight year of at least 5% dividend growth in early 2022. Overall, Brookfield's dividend has averaged 6% compound annual growth throughout its history.
Brookfield has been able to steadily increase its payout because it has consistently grown its funds from operations (FFO) per share. Several factors have helped power its growth, including higher power prices, falling costs as it increases its scale, development projects, and acquisitions. Brookfield also benefits from the contractually secured recurring cash flow from its renewable power assets, and a strong financial profile. Those factors give it the financial flexibility to continue growing its renewable-energy portfolio and its dividend.
Decades of growth still ahead
Brookfield has benefited from the increasing demand for renewable energy over the years. That's only going to grow stronger in the future. The company estimates that the global economy will need to invest a whopping $150 trillion to decarbonize over the next 30 years. That should provide Brookfield with countless investment opportunities to power its dividend in the future.
Currently, the company has 69 gigawatts (GW) of clean-energy projects in its development pipeline. That's enough to power more than 9 million homes for one year. It's more than triple its current operating capacity of 21 GW.
Those development projects, combined with the embedded growth of its legacy assets from higher power prices and falling costs, should support annual FFO per share growth of 6% to 11% through at least 2026. Meanwhile, Brookfield sees acquisitions providing up to 9% of additional FFO-per-share growth each year. That should easily support the company's plan to grow its dividend at 5% to 9% annually over the long term.
The company is also investing in emerging technologies like hydrogen and carbon capture, which are potentially massive market opportunities. On top of that, it sees an enormous opportunity to help other companies with their energy transition. Such projects could include taking over utilities and making investments to reduce their carbon footprint, and building out electric-vehicle charging infrastructure. The company recently launched a $15 billion investment fund focused on energy transition, and sees the potential to grow that business to more than $200 billion in the future.
By continuing to evolve and invest in emerging trends before they become mainstream, Brookfield should be able to keep finding new sources of growth should legacy ones dry up. That increases the probability that it can continue generating a growing stream of steady cash flow to sustain dividends in the decades that come.
Plenty of power to sustain its dividend
Few companies are in a better position to pay a sustainable dividend than Brookfield Renewable. It's taking a broad-based approach to the overall energy transition, diversifying across technology and geography. That provides it with multiple avenues for future growth. The company shouldn't have any trouble continuing to grow its cash flow and dividend in the decades ahead, making it seem likely that Brookfield can supply investors with a lifetime of passive income.