Brookfield Renewable Corporation (BEPC +0.00%) has been a hard stock to love over the past three years. But the business hasn't skipped a beat. Here's why, despite steep losses, investors will probably still find Brookfield Renewable an attractive way to invest in the clean energy sector.
A lot of heartache for investors
Looking at stock price performance, a $10,000 investment in Brookfield Renewable Corporation three years ago would be worth just about $5,200 today. That hurts, but it basically coincides with a deep downturn in the clean energy sector. For example, the same investment in the iShares Global Clean Energy ETF (ICLN +0.26%) would be worth about $6,600 today. Notably, both are about 60% below their high-water marks over that span.
There's no way to sugarcoat that performance. It is bad. Even adding in reinvested dividends, which is total return, the performance is pretty dismal. The investment in Brookfield Renewable Corporation with dividends reinvested goes from $10,000 down to around $5,800, while the iShares Global Clean Energy ETF takes that $10,000 down to about $6,800.
The important takeaway here, however, is that Brookfield Renewable Corporation isn't an outlier. The big problem is that Wall Street's view of the clean energy sector has changed from, perhaps, irrational exuberance to something more realistic. And, viewed with that lens, there are still a lot of reasons to like the long-term story around Brookfield Renewable.
Now could be an attractive entry point
Brookfield Renewable Corporation's dividend yield is currently around 5.8%. That's historically high for Brookfield Renewable Corporation and back into a more normal range for its companion shares of Brookfield Renewable Partners (BEP 0.26%). Both represent ownership in Brookfield Renewable, just in different forms. The Brookfield Renewable Corporation class of shares was essentially created so institutional investors that couldn't own partnerships, like insurance companies, could still invest. But, all in, the yield looks fairly reasonable today, historically speaking.
BEP Dividend Yield data by YCharts
Notably, Brookfield Renewable Partners, the share class with the longer history, has increased its quarterly disbursement annually since 2014. The compound annual growth rate of the distribution over that span was roughly 6%. That's right in line with management's long-term distribution growth goal. So you get an attractive yield and a strong history of income growth. But what about the future?
On that front, Brookfield Renewable operates 32 gigawatts of capacity today and has a huge 132 gigawatts in the development pipeline. In other words, the company hopes to increase its capacity by over four times from current levels. That won't happen all at once, so there are many years' worth of growth ahead here. Some years may see more growth than others, but the long-term trend is almost certainly for Brookfield Renewable to get bigger over time.
NYSE: BEPC
Key Data Points
Getting from here to there will cost a lot of money. Higher interest rates will make growth more expensive, which is part of the reason why the clean energy sector has fallen on hard times. But it is highly likely that Brookfield Renewable will continue to expand along with the world's push into clean energy. For starters, Brookfield Renewable has an investment-grade rated balance sheet, which should afford it attractive access to debt capital. And, just as important, it is backed by financial giant Brookfield Asset Management (BAM +0.00%), its parent company. So there's actually a lot more firepower here than meets the eye.
Hold on to this stock or buy some more
It is hard to sit on paper losses, but Brookfield Renewable looks well-positioned to keep growing its business and the income it passes on to investors. If you bought it back when Wall Street was in love with clean energy stocks, you might want to keep holding it so you can benefit from the long-term growth potential. That's particularly true if you bought it with the hope of collecting a growing income stream, since that piece of the story hasn't changed at all.
If you're only just starting to look at this clean energy stock today, now could be a good time to buy this high-yield dividend growth stock, given the long-term shift the world is making toward clean energy.
