If there is one thing that artificial intelligence (AI) can't live without, it is reliable power. Sure, the technology is impressive, but it simply won't work without electricity. And that is why large Canadian asset manager Brookfield Asset Management (BAM 0.28%) has targeted digitization as one of its three main investment themes.
One of that company's key vehicles for investing in digitization is Brookfield Renewable (BEP +1.76%)(BEPC +1.37%), a high-yield publicly traded business that the asset manager controls. Here's why you might want to consider investing alongside Brookfield Asset Management through an investment in Brookfield Renewable.
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Big yield, big opportunity
For most investors, the primary attraction of Brookfield Renewable is its yield. There are actually two versions of the business you can buy. One is a partnership, which offers a distribution yield of 5.3%. The other is a corporation, which offers a dividend yield of 3.7%. They represent the same entity and have the same quarterly dividend payment.
The reason why the corporate share class has a lower yield is that there is higher demand for that version of Brookfield Renewable. Institutional investors are often barred from owning limited partnerships, leaving the partnership class somewhat unloved on Wall Street.
That said, the partnership is managed in a way that the distributions do not run afoul of the tax rules for tax-advantaged retirement accounts. Thus, it can be owned in an IRA. If you aren't an institutional investor, there's really no reason why you wouldn't want to own the higher-yielding partnership class.
NYSE: BEPC
Key Data Points
The goal for Brookfield Renewable is to increase the dividend/distribution by 5% to 9% a year. Management believes that it will invest between $9 billion and $10 billion into its portfolio of clean energy assets by 2030, leading to 10% annualized growth in funds from operations. That level of growth should be more than enough to support the distribution target.
Big yields and solid business growth are what should attract investors to Brookfield Renewable.
The AI backbone is going to be a big story
As noted, a key part of the story here is digitization. Brookfield Asset Management explains that "growing global demand for energy security and low-carbon energy will require substantial continued investment" in clean energy and other energy technologies. AI is a big part of the demand story right now. Brookfield Renewable gives Brookfield Asset Management access to permanent capital dedicated to clean energy.
In other words, you are investing alongside Brookfield Asset Management when you buy Brookfield Renewable. This gives Brookfield Renewable a much larger seat at the table than it would have without the backing of the giant Canadian asset manager. But what has this relationship led to? Brookfield Renewable has partnerships to supply power to technology giants Microsoft (MSFT +0.65%) and Google, which is owned by Alphabet (GOOG 0.81%).
NYSE: BEP
Key Data Points
The reason Brookfield Renewable can be such an attractive partner is due to its diversification. It has operations in North America, South America, Europe, and Asia. And its clean energy footprint spans solar, wind, storage, hydroelectric, and now nuclear power. In other words, a company can work with Brookfield Renewable just about anywhere it wants and with just about any clean energy technology it wants.
From an investor's standpoint, Brookfield Renewable is a one-stop shop for clean energy. And given that it is keyed into the ongoing development of the backbone that supports artificial intelligence, it is a solid, high-yield "picks and shovels" play on AI.
Should you buy Brookfield Renewable?
If you are looking for an exciting tech-related investment to own, you probably won't find Brookfield Renewable appealing. Generating electricity, even renewable energy, is a pretty boring business.
However, when you factor in the high yield Brookfield Renewable is offering, particularly the partnership share class, the story becomes more interesting. This could be a solid way for income-focused investors to get in on the AI action without needing to buy a low-yield or no-yield tech stock.
