The momentum surrounding renewable energy continues to build. Decarbonization is only part of the story. Renewables are low-cost, which is driving accelerating demand, especially as the world needs more power for emerging technologies like artificial intelligence.
These trends play right into the hands of Brookfield Renewable (BEPC +0.00%)(BEP 0.53%). The leading global renewable energy company is capitalizing on opportunities to develop more projects for customers. That drives its view that it will grow its funds from operations (FFO) by more than 10% this year and beyond. This surge should give it plenty of power to continue increasing its dividend, which yields over 5%.
NYSE: BEPC
Key Data Points
Another strong quarter
Brookfield Renewable recently reported strong second-quarter results, showcasing the robust demand for renewables. The company generated $339 million of FFO in the second quarter, a 9% increase from the previous year. Higher power prices, organic development projects, and acquisitions powered the company's strong growth rate.
The biggest boost came from its sustainable solutions business, where FFO surged from $10 million to $42 million. The company benefited from its investment in nuclear service provider Westinghouse. That business is performing well, and its outlook is growing stronger. Many increasingly see nuclear energy as part of the solution to helping decarbonize the economy and meet the world's growing energy needs. That should benefit Westinghouse in the coming years.
Brookfield's utility-scale solar energy platform also generated strong results, growing its FFO from $77 million to $91 million. The company has acquired or developed 7.2 gigawatts (GW) of solar and wind energy capacity over the past year.
Supercharged growth ahead
The company's strong second quarter and building momentum have it on track to deliver on its target of growing its FFO by more than 10% this year. Brookfield completed 1.4 GW of renewable energy development projects in the second quarter. It's on pace to finish 7 GW this year.
Brookfield and its partners also agreed to invest $8.6 billion, $970 million of which Brookfield will fund, across several new opportunities worldwide. The biggest was striking a deal to acquire a majority interest in Neoen. The European renewable energy company has 8 GW of capacity that's currently operating or under construction. Meanwhile, it has another 20 GW of projects in advanced stages of development. Brookfield and its partners expect to close the deal in the fourth quarter and then launch an offer to buy the rest of the company. It will invest about $540 million into this $6.7 billion deal.
Brookfield and its partners also agreed to buy Leap Green, a leading wind energy business in India, for $200 million, $40 million of which it will fund. Leap Green has 500 megawatts (MW) of operating capacity and nearly 3 GW of development projects. With the addition of Leap Green, Brookfield will now operate one of the biggest renewable energy businesses in India.
Finally, the company made its first investment in South Korea. Brookfield and its partners are investing up to $500 million, $100 million net to Brookfield, in Hanmaeum Energy. The company has 340 MW of operating and near-construction assets and over 4 GW of development projects and identified acquisition opportunities.
These deals have helped expand Brookfield's development pipeline to 230 GW of projects, including 65 GW in advanced stages. That will provide the company with a lot of visible growth in the coming years. It helps support the company's plan to grow its FFO per share at a more than 10% annual rate. That should give it the power to increase its high-yielding dividend by 5% to 9% per year.
That large pipeline will help Brookfield meet the growing demand for renewable energy from corporate customers. The company noted that large technology companies increasingly need more power to support their cloud and AI technologies. For example, it's building 10.5 GW of power for Microsoft in the 2026-2030 timeframe.
Supercharged total returns ahead
Brookfield Renewable expects to grow its FFO per share by more than 10% annually in 2024 and beyond. That should give it plenty of power to continue increasing its 5%-yielding dividend. Add it up, and the company could generate total annual returns in the mid-teens. That high-powered total return potential makes it a great stock to buy and hold for the long haul.
