Shares of Brookfield Renewable (BEPC 2.49%) (BEP 2.62%) tumbled more than 7% last Friday following its second-quarter earnings report. That slump is somewhat puzzling, given that the renewable-energy giant posted strong numbers.
Brookfield Renewable is becoming the partner of choice for companies that need clean energy to power their operations in the coming years. This puts the company in a strong position to continue growing its earnings and its high-yielding dividend of more than 4%.
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A very strong quarter
Brookfield Renewable generated $371 million or $0.56 per share of funds from operations (FFO) in the second quarter. That was up 10% year over year. The company benefited from strong operating results across its portfolio, backed by its stable, inflation-linked, and contracted cash flows. It also got a boost from its growth initiatives.
The company's legacy hydropower business delivered impressive results, with its FFO surging more than 50% to $205 million. Its hydro fleets in the U.S. and Colombia delivered results above their long-term average, rebounding from a challenging year.
Brookfield's distributed energy, storage, and sustainable solutions segment also posted strong results, as its FFO jumped nearly 40% to $118 million. The primary driver was its investment in the nuclear services company Westinghouse, which is benefiting from the resurgence in demand for nuclear power.
Strong results in those segments helped offset the performance of the company's wind and solar operations, which generated $184 million of FFO during the period. The sale of one of its businesses offset the growth from development projects and other acquisitions.
The high-powered growth should continue
Brookfield stated in its earnings release that "looking to the rest of 2025, we expect to achieve our 10%+ FFO per unit annual growth target." It's also in a strong position to deliver on its growth target in 2026 and beyond.
One factor fueling that optimism is its success in securing new investments. The company recently agreed to invest $1 billion to increase its equity stake in Colombian hydropower producer Isagen to 38%. Brookfield noted that the transaction will be immediately accretive to its FFO per unit this year, while boosting its results by about 2% next year.
Meanwhile, the company's U.S. hydro business should continue delivering strong results. Brookfield noted that the above-average performance it saw in the second quarter should continue throughout this year and into 2026, "given the typical multiyear cycle we see in the hydrology of our fleet." Brookfield recently signed a major deal with technology giant Google to supply up to 3 gigawatts (GW) of hydropower in the coming years. The first contracts under this agreement are for 670 megawatts of capacity from two plants in Pennsylvania, representing more than $3 billion of future power sales to the technology giant.
Beyond hydropower, Brookfield continues to invest heavily in wind, solar, and energy storage. For example, the company secured $7 billion in project financing for Polenergia's offshore wind development in Poland, the largest ever project financing in its business. The company is also on track to start delivering on its agreement to provide Microsoft with over 10.5 GW of renewable energy in the coming years.
Brookfield has several long-term growth catalysts. These include inflation-linked rate increases, locking in higher power prices as older agreements expire (such as its hydro deal with Google), development projects for Microsoft and others, and new investments like Isagen. These factors put Brookfield in a strong position to deliver 10%-plus annual FFO-per-share growth. This level of growth should also support annual dividend increases of 5% to 9%. Brookfield has raised its dividend by at least 5% annually for the past 14 years.
An extremely compelling investment opportunity
Brookfield Renewable's stock dropped despite its strong second-quarter results. That makes this leading renewable energy dividend stock look like a screaming buy. With strong growth ahead, it could continue to generate robust total returns in the coming years, especially from its now lower share price.
