Brookfield Renewable (BEP 10.90%) (BEPC 10.63%) and Brookfield Infrastructure (BIP 2.46%) (BIPC 2.49%) have exceptional track records of creating shareholder value since their respective formations by Brookfield Corporation (BN 2.12%) more than a decade ago. They have both generated annualized total returns of 16% since their formation, easily outpacing the broader market.
Both companies cooled off during the bear market last year, losing around a quarter of their value. However, they've started to heat back up in 2023, rising around 15% apiece. They could have a lot more upside ahead. Here's what's powering their rebound and why they could have plenty of fuel to continue rising.
Adding even more power to its growth profile
Despite its sell-off last year, 2022 was another strong one for Brookfield Renewable. The leading global renewable energy producer grew its funds from operations (FFO) by a solid 8% per share. That allowed it to increase the dividend by 5.5%, its 12 straight year of growing the payout by at least 5%. Meanwhile, the company closed or agreed to invest up to $2.8 billion across several transactions to drive future growth.
Those deals have helped accelerate growth in 2023 as FFO per share surged 13% in the first quarter. In addition, the company secured deals to invest more than $1 billion across several new transactions. It agreed to take over and decarbonize an Australian utility and buy Duke Energy's commercial renewable energy business. That later deal alone will boost its FFO by at least 3% next year.
The company's success in securing new investment opportunities enhances its long-term growth profile. Brookfield Renewable estimates it can grow its FFO per share by more than 10% annually through 2027, powered by development projects, higher power prices, and continued M&A. That should give it the power to increase its dividend -- which currently yields 4.3% -- by 5% to 9% per year.
With shares still off their peak price and more earnings and dividend growth ahead, Brookfield Renewable has plenty of power to continue producing market-beating total returns in the coming years.
The wheeling and dealing continues
Brookfield Renewable's infrastructure-focused sibling Brookfield Infrastructure is coming off an even stronger year in 2022. The global infrastructure operator's FFO per share rose 12%, powered equally by organic growth drivers and acquisitions. Inflation-driven rate increases and expansion projects drove its organic growth, while $1 billion of closed acquisitions helped double its overall growth rate.
Those drivers gave it lots of momentum heading into 2023. The company's FFO grew by 12% in the first quarter, driven by 9% organic growth. The infrastructure company also got a boost from the $2.4 billion of new acquisitions closed over the past year, including a couple of large ones in the first quarter.
Brookfield Infrastructure has continued to be an active acquirer in 2023. The company and its institutional partners agreed to acquire leading global container leasing company Triton International in a $13.3 billion deal. Brookfield will invest about $1 billion of equity into that transaction. Meanwhile, the company has agreed to acquire two data center operators. It's investing $600 million into a $2.4 billion deal to acquire European data center platform Data4. It's also partnering with an existing investor to buy U.S. data center developer Compass Datacenters.
These deals will help drive accelerated growth for Brookfield in 2023 and beyond. The company will also get an earnings boost from development projects. It recently finished construction on the Heartland Petrochemical Complex in Canada which should boost earnings in the second half of this year. It's also funding roughly half the cost to build two semiconductor fabrication facilities in Arizona for Intel that should start up next year.
Brookfield Infrastructure believes it can grow its FFO per share at a more than 10% annual rate in the near term, driven by those factors and elevated inflation rates. That should enable the company to achieve its target of growing the dividend by 5% to 9% per year. With its share price still down from last year's sell-off, that payout yields 4.4%. The company's combination of yield and growth positions it to produce market-beating total returns in the coming years.
Heating up with more upside ahead
Sibling companies Brookfield Infrastructure and Brookfield Renewable are starting to heat back up after a down year in 2022. The duo has plenty of fuel to continue rising. They have strong organic growth prospects that they've significantly enhanced over the past year with acquisitions. That should fuel double-digit earnings growth for the next several quarters, giving them more power to increase their attractive dividends. These catalysts should enable them to produce strong total returns from here.
