Is Brookfield Renewable an Income Investor's Dream-Dividend Stock?

It's quite easy to list the attributes that income investors love to see in a stock. Obviously, a juicy dividend yield is high on the list. A reliable payout ranks way up there, too. And while income is paramount, even dividend investors enjoy share-price appreciation.

There are quite a few stocks that check off all of those boxes. One that especially jumps out to me, though, is Brookfield Renewable (BEP 0.19%) (BEPC 0.09%). Is Brookfield Renewable an income investor's dream-dividend stock?

A stellar distribution

You can invest in the renewable energy provider in one of two ways. The original limited partnership (LP), Brookfield Renewable Partners, trades under the BEP ticker. In 2020, the company created another entity, Brookfield Renewable Corporation, that trades under the BEPC ticker. The BEPC shares don't come with the tax hassles associated with investing in LPs.

Investors looking for exceptional income will almost certainly find both Brookfield Renewable stocks intriguing. BEP's distribution yield currently stands at 5.4%. BEPC's yield isn't too far behind at 5.04%.

Since 2012, Brookfield Renewable has grown its distribution by a compound annual growth rate (CAGR) of 6%. The company believes that it will be able to deliver ongoing annual distribution growth of between 5% and 9%. At the midpoint of that range, investors would see their income roughly double every decade.

Strong growth prospects

Brookfield Renewable CEO Connor Teskey proclaimed in the company's third-quarter conference call, "[T]he outlook for our business has never been better." He noted, "Over the past five years, the amount of clean energy procured annually by corporations has increased by almost 10 times. And looking forward, we do not expect this trend to slow down."

I don't think that's just spin from a top executive. Governments and companies across the world have set aggressive carbon-reduction goals. The only way they'll come anywhere close to achieving them is for renewable energy sources to provide a lot more power than they do today. Brookfield Renewable is in a great position to help.

The company's current installed capacity totals around 31.5 gigawatts. Brookfield Renewable's development pipeline could add another 143 gigawatts to that total. Management expects at least 18 gigawatts to be commissioned over the next three years.

Brookfield Renewable should be able to expand rapidly via acquisitions. Teskey said in the Q3 call, "Notably, we are seeing particularly attractive opportunities to acquire businesses with strong development pipelines but lack the access to capital or scale operating capabilities to build out these projects."

With these tailwinds, the company fully expects to deliver average total returns over the long term of between 12% and 15% each year. Brookfield Renewable's funds from operations (FFO) have grown by more than 10% over the past decade. The renewable-energy provider thinks that it has a "highly visible path to double-digit FFO growth" going forward as well.

An income investor's dream?

No stock is perfect, of course. I think that there's one primary knock against Brookfield Renewable. Although the company has increased its distribution nicely in recent years, the track record isn't perfect. For example, Brookfield Renewable reduced its distribution in the wake of the COVID-19 pandemic in 2020.

However, the distribution yield of over 5% is absolutely attractive. I have no concerns about Brookfield Renewable being able to increase the distribution in the future at its targeted level. I also believe that the company's growth prospects are as solid as they come. In my view, Brookfield Renewable truly is an income investor's dream.