No one has a crystal ball to see into the future. Because of that, it's nearly impossible to predict what factors might affect a company's ability to continue growing.
However, it's evident that we need to reduce carbon emissions to ward off the worst possible effects of climate change. That suggests leading decarbonization provider Brookfield Renewable (BEP 0.19%) (BEPC 0.09%) should have lots of growth ahead. It should give the renewable energy company plenty of power to continue growing its dividend. That makes it a great stock to buy for a potential lifetime of dividend income.
A powerful growth profile
The global economy must invest trillions of dollars over the coming decades to reach net-zero emissions. By 2030, the International Energy Agency estimates that the world needs to install four times the amount of wind and solar energy capacity it did in 2020 to stay on the path of achieving net-zero emissions by 2050.
That's providing Brookfield Renewable with growing opportunities to develop additional renewable energy capacity. The company currently has an astounding 110 gigawatts (GW) of renewable energy projects under development. To put that into perspective, it's enough to offset the entire emissions of Poland for one year and power 100% of Canadian homes with electricity. It's also four times larger than the company's current operating portfolio.
Brookfield Renewable plans to invest $6 billion to $7 billion of its balance sheet capital over the next five years into developing these projects and making additional acquisitions. Its development pipeline alone will support 3% to 5% annual growth in its funds from operations (FFO) per share through 2027. Meanwhile, inflation escalation clauses embedded in its existing long-term power sales contracts and margin enhancement initiatives to capture higher prices as legacy contracts expire will add another 4% to 7% to its FFO per share each year.
In addition, acquisitions could add up to another 9% to its bottom line each year. The company has already secured and funded 8% annual growth through 2027 from this quartet of drivers. Brookfield has secured over $8 billion of new investments already this year (over $1 billion of which it will fund, with the rest financed by its partners).
The biggest deal is the privatization of Australia's Origin Energy. Brookfield is investing $750 million into the acquisition and participating in investing up to 20 million Australian dollars ($13 billion) to help decarbonize one of Australia's largest utilities by building out renewable energy capacity. That deal serves as a potential blueprint for other decarbonization investments. Brookfield recently launched its second Global Transition Fund to help lead global decarbonization efforts.
A magnificent and fully powered dividend
Brookfield Renewable's growing cash flow will give it more power to increase its dividend, which currently yields around 4%. The company boosted its dividend payment by 5.5% earlier this year, marking its 12th straight year of dividend growth of at least 5%. That's every year since the company's public market listing in 2011. Brookfield expects to continue growing the payout in the future, targeting a 5% to 9% annual growth rate.
The company further supports its payout with a strong investment-grade balance sheet. Brookfield has a BBB+ bond rating, primarily long-term, fixed-rate debt, and lots of liquidity. Meanwhile, the company continually replenishes its liquidity through its capital recycling program. The company has about $1.5 billion of asset sales underway, which will help fund higher-return new investments like Origin Energy.
A great dividend stock to buy and hold forever
Brookfield Renewable has an exceptional track record of growing its dividend. That upward trend seems likely to continue. The company's strong financial profile should support its ability to capitalize on the decarbonization megatrend while continuing to grow its payout. Those features could enable Brookfield Renewable to pay dividends to investors for the rest of their lives.
