Babe Ruth made history in Game 3 of the 1932 World Series. The New York Yankees slugger had already hit one home run. In the top of the fifth inning with two strikes against him, he seemed to point to center field. On his next swing, Ruth hit the baseball to center field for another home run.
Anyone can predict they'll achieve an audacious goal. Few actually make it happen. I think Brookfield Renewable (BEP 1.24%) (BEPC +0.00%), like the Babe, belongs to the latter category. This high-yield dividend stock could realistically triple your money in just 10 years.
NYSE: BEP
Key Data Points
Pointing to the fence
Most companies use vague language in describing how much they expect to grow. That's not surprising. Setting overly ambitious goals can backfire if they're not attained. Going with projections that are too safe can also disappoint investors.
Brookfield Renewable isn't one of those companies. The renewable energy provider makes no bones about its targeted growth. Brookfield has repeatedly stated that it intends to deliver total returns of between 12% and 15% over the long term.
If Brookfield Renewable hits the low end of that range, its total returns would nearly double an initial investment in six years. And thanks to the power of compounding, that initial investment would more than triple in 10 years.
What if the company generates total returns at the upper end of its projected range? Instead of tripling your money in 10 years, Brookfield Renewable's total returns would more than quadruple it.
Making it happen
The obvious question is: Can Brookfield Renewable actually make this happen? I think the answer is a resounding "yes."
For one thing, Brookfield Renewable has delivered even greater returns over its history. Since the company's formation in 1999, its total return was roughly 16%.
Of course, past success doesn't necessarily mean that Brookfield Renewable will keep up its winning ways. I predict that it will, though, for three key reasons.
First, the demand for renewable energy will almost certainly increase significantly over the coming years. The International Energy Agency projects that wind and solar power generation capacity will need to quadruple by 2030 from the 2020 levels to achieve carbon emission goals.
Second, Brookfield Renewable is taking the necessary steps to boost its capacity to meet this increased demand. The company's operational capacity currently stands at 32 gigawatts. Its pipeline capacity totals 132 gigawatts.
Third, electricity production from onshore wind and solar is now much cheaper than using coal or gas. Even if the world abandoned carbon reduction plans (which I don't think will happen), the cost advantages alone should lead to strong growth for renewable energy leaders such as Brookfield Renewable.
A home run stock
I think that growth investors should really like Brookfield Renewable. There aren't many stocks that offer as clear a pathway to tripling an initial investment as this one does.
Income investors should absolutely love the stock. A significant part of Brookfield Renewable's total return will come from its distributions. Its distribution yield currently stands at nearly 4.7% for the limited partnership units that trade under the BEP ticker and over 4.2% for the corporate entity shares that trade under the BEPC ticker.
Even better, Brookfield Renewable expects to increase its distribution by 5% to 9% on average each year. Since 2001, the company's distribution increased by a compound annual growth rate of around 6%.
Any investor who wants to swing for the fences without taking on a ridiculous amount of risk should take a hard look at Brookfield Renewable. In my view, it's definitely a home run stock.
