Brookfield Renewable (BEPC 0.22%)(BEP 0.13%) has been a wealth-creating machine over the years. The leading global renewable energy producer has grown its dividend at a 6% compound annual rate since 2001. That has helped power a 15.6% average annual total return for its investors.
While that past performance doesn't guarantee its future returns will be as strong, the company's current outlook suggests the next 10 years could be just as good, if not better. If Brookfield can deliver similar returns over that period, it could grow a $1,000 investment made this July into more than $4,250 by the middle of 2035.
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A strong base return
Brookfield Renewable currently pays a dividend yielding around 4.5%. That's more than three times higher than the S&P 500, which yields less than 1.5%. Brookfield's high-yielding dividend provides investors with a very strong base return.
That payout is on a very sustainable foundation. Brookfield sells 90% of its electricity under long-term, fixed-rate power purchase agreements (PPAs) with an average remaining term of 14 years. Most of those PPAs link rates to inflation, accounting for 70% of Brookfield's revenue and allowing the company to produce predictable and steadily rising cash flow. Brookfield estimates that inflation-linked rate increases will boost its funds from operations (FFO) by 2% to 3% per share each year.
NYSE: BEPC
Key Data Points
The market price for renewable energy is rising faster than inflation because of robust demand, and Brookfield expects to lock in even higher power prices as legacy PPAs expire. Recontracting and other margin enhancement activities should add another 2% to 4% to its FFO per share each year.
The stable and growing cash flow from Brookfield's existing portfolio puts its high-yielding dividend on a solid foundation. The company also has a strong investment-grade balance sheet, further fortifying its payout.
Additional growth drivers
Brookfield Renewable has two other growth drivers: Development projects and acquisitions. The company has 74 gigawatts (GW) of renewable energy projects in its advanced-stage pipeline. That's almost double its current operating capacity of nearly 45 GW. It expects to commission 8 GW of projects this year as it ramps up to its target of 10 GW annually by 2027. Brookfield estimates that development projects will add 4% to 6% to its FFO per share each year.
The company is steadily signing PPAs to support its development pipeline. It inked a massive 10.5 GW deal with Microsoft last year for projects it expects to develop in the 2026-to-2030 timeframe. Brookfield believes it could eventually provide the technology company with even more power in the future, given the immense demand for electricity needed to power AI data centers.
In addition, Brookfield expects to continue making accretive acquisitions largely funded by recycling capital. The company recently closed its acquisition of French renewable energy developer Neoen, which enhanced its development pipeline in several fast-growing markets. It also recently agreed to buy National Grid's U.S. onshore renewable-energy platform. That deal will add 3.9 GW of operating and under construction assets, a 1 GW construction-ready portfolio, and more than 30 GW of development projects. It's funding these new investments by selling several assets at strong valuations. Brookfield believes that its capital recycling strategy will further accelerate its growth rate.
Brookfield estimates that this quartet of catalysts will grow its FFO per share at more than a 10% annual rate for the foreseeable future. That growth is highly visible and secured through the end of the decade, and increasingly visible and secured in 2030 and beyond.
High-powered total return potential
Brookfield Renewable's high-yielding dividend provides a solid and growing base return. It's targeting 5% to 9% annual dividend increases. On top of that, the company expects to grow its FFO per share at more than a 10% annual rate for at least the next decade. It has delivered 11% compound annual growth over the past 10 years. Add the dividend yield to the company's growth rate, and Brookfield could deliver total returns above 15% annually. That strong probability of earning a high total return makes Brookfield Renewable a great stock to invest $1,000 into this July.
