Brookfield Renewable (BEPC -1.56%) (BEP -0.32%) has done a magnificent job over the years delivering a growing dividend to its investors. The leading renewable energy producer has increased its payout at a 6% compound annual rate since its inception in 1999. That steady growth has helped push its dividend yield up to 5%.
The top renewable energy dividend stock should have ample power to continue increasing its payout in the future. It's an exceptional option for those seeking an attractive and steadily rising stream of dividend income.
A strong start to the year
Brookfield Infrastructure recently reported its first-quarter results. The company generated a record $296 million, or $0.45 per share, of funds from operations (FFO). Brookfield's FFO surged nearly 8% overall and by almost 5% on a per-share basis.
The company benefited from its hydroelectric portfolio's solid results and development and growth initiatives elsewhere. The hydroelectric business generated power at 105% of the long-term average, enabling it to capitalize on strong pricing. Meanwhile, the company's wind and utility-scale solar segments delivered solid results, powered by recently closed acquisitions and commissioning new projects. Finally, its distributed energy and storage and sustainable solutions segments delivered solid quarterly results. Brookfield benefited from the strong performance of its recently acquired Westinghouse nuclear services business and the continued growth of its distributed generation segment.
The company also continued to make progress on its massive development pipeline. It expects to bring 7 gigawatts (GW) of new renewable energy capacity online this year. That's a meaningful amount of capacity, considering the company's current operational capacity was 34 GW at the end of the first quarter. These projects help support the company's view it will grow its FFO per share by more than 10% this year. Overall, Brookfield has a staggering 157 GW of projects in various stages of development.
A powerful growth tailwind
The technology sector is a key enabler for renewable energy. Tech titans want to be good global citizens. That is driving them to sign power purchase agreements (PPAs) to cover their current and future energy needs. Those future requirements are growing rapidly as cloud computing, digitalization, and AI will drive robust power demand in the coming years.
Brookfield Renewable is capitalizing on this trend by signing PPAs with leading technology companies to support renewable energy developments. Brookfield recently signed a landmark renewable energy framework agreement with Microsoft (MSFT -0.18%). The deal will see Brookfield deliver 10.5 GW of new renewable energy capacity in the U.S. and Europe to Microsoft between 2026 and 2030. That's in addition to the nearly 1 GW Brookfield will deliver to Microsoft through 2025. The companies could also expand their agreement to additional regions in the future.
The deal positions Brookfield to add over 7 GW of new capacity annually through the end of the decade to Microsoft and other clients. That puts Brookfield in a strong position to deliver 3% to 5% annual FFO per share growth from its development pipeline through 2028. That's on top of the strong 4% to 7% annual FFO per share growth expected from its legacy portfolio, driven by inflation-indexed PPA rates and margin enhancement activities like providing ancillary services. Add in M&A activities, and Brookfield is confident it can deliver 10%-plus annual FFO per share growth through at least 2028.
That strong earnings growth outlook puts the company in an excellent position to achieve its target of increasing the dividend by 5% to 9% per year. Brookfield has raised its payout by at least 5% annually for 13 straight years.
Powerful value creation potential
Brookfield Renewable expects to generate more than 10% annual FFO per share growth through at least 2028. A big power source is delivering renewable energy projects to support the growing power needs of technology titans like Microsoft. The company's growing cash flow will enable it to increase its 5%-yielding dividend by at least 5% annually. Add it all up, and Brookfield could easily produce total annualized returns in the mid-teens over the next several years. That makes it stand out as an exceptional dividend stock to buy for the long term.
