Brookfield Renewable (BEPC +0.00%)(BEP +0.85%) takes a broad approach to investing in renewable energy. It has a global reach and diversified platform across several technologies. That comprehensive strategy enables it to capitalize on the best opportunities, positioning it to grow faster and generate higher returns for its investors.
India is one area where Brookfield sees enormous growth opportunities for renewable energy. That's leading the company to significantly boost its investment in the country, which it expects will be a major growth driver for years to come.
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Key Data Points
Building out an expandable platform in India
Brookfield Renewable has already invested $1 billion into India's renewable power sector since its initial entry in 2017. That spending has helped fund about a quarter of the 4 gigawatts (GW) of projects the company currently has in operation and under development in the country. Brookfield aims to invest double that amount over the next 18-24 months to complete those projects and make new investments.
The company has recently made several acquisitions to build its current operating platform and development pipeline. For example, in the second quarter, Brookfield agreed to acquire its first renewable energy park in India. The project is currently under construction and will have about 500 megawatts (MW) of capacity once complete.
The company and its partners are investing $110 million ($22 million net to Brookfield Renewable) in a project that will enable them to provide decarbonization services to large-scale commercial and industrial customers. Brookfield sees the renewable energy park concept as a highly repeatable strategy.
Brookfield also completed its first greenfield project in India during the second quarter, finishing construction on a 450 MW solar facility. It acquired the rights to several development projects last year, including a 450 MW project as part of a pipeline consisting of 1.7 GW of projects it's developing with a joint-venture partner. Brookfield also acquired loans at the end of 2020 that ultimately turned into the right to buy another 450 MW solar project under development from a large solar developer.
Grand ambitions
This growing platform will serve as a base for future expansion in the country. The company sees the potential of growing its current 4 GW project portfolio by three to four times over the coming decade, boosting the total to 12 GW-16 GW. For perspective, the company's current global operating portfolio consists of 23 GW of capacity, equal to removing 6 million vehicles from the road.
That's still a small fraction of India's power needs. The country expects to build 500 GW of clean power by the end of the decade, triple its current capacity. That's a crucial step toward the country's goal of achieving net zero emissions by 2070. That enormous market potential should provide Brookfield with lots of attractive investment opportunities.
Those future investments should enable Brookfield to grow its funds from operations (FFO) and dividends at attractive rates. The company expects a combination of inflation-linked rate increases, its growing scale advantages, and its development pipeline to drive organic FFO per-share growth of 6% to 11% per year through 2026. That will easily support its plan to grow its dividend at a 5% to 9% annual rate.
Meanwhile, Brookfield sees merger and acquisition (M&A) activities adding up to 9% to its FFO per share each year, further enhancing the sustainability of its dividend. The highly visible growth of its 3%-plus-yielding dividend makes Brookfield one of the top renewable energy dividend stocks.
Given the enormous growth potential of India's renewable energy market, Brookfield should be able to continue growing at a healthy rate for years to come. That could give it the power to maintain an attractive dividend-growth rate. Brookfield has already increased its payout by at least 5% for the last 11 straight years and could continue that pace well into the future.
A powerful growth driver
Brookfield sees a bright future for India's renewable energy market. However, that's only one of the company's many growth drivers. It increases the likelihood that the company can continue delivering unstoppable dividend growth for years to come. That makes it a great dividend stock to buy and hold for the long haul.
