Brookfield Renewable expects to continue generating high-powered earnings growth.
Brookfield Renewable (BEPC 1.03%) (BEP 0.80%) is a rare investment opportunity. The leading global renewable energy producer offers investors high-powered income and growth. It currently yields around 4.5% (much higher than the S&P 500‘s 1.5% dividend yield). On top of that, it’s growing its earnings at a double-digit rate.
The renewable energy dividend stock is expected to continue growing briskly. Combined with its attractive and growing dividend, Brookfield Renewable could produce powerful total returns over the coming years.
Powerful growth
Brookfield Renewable recently reported its third-quarter results. The company generated $278 million, or $0.42 per share, in funds from operations (FFO), up nearly 11% from the prior-year period. The company benefited from strong power prices, recently completed development projects, and accretive acquisitions.
Brookfield’s legacy hydroelectric fleet continues to generate strong results. The company is seeing healthy demand for the clean power its hydro facilities produce. That allowed it to sign two favorable contracts with U.S. utilities during the quarter. Those and other recently signed contracts supply incremental cash flow.
Meanwhile, the company is investing heavily in expanding its wind and solar energy platforms. Brookfield commissioned 1.2 gigawatts (GW) of new renewable energy capacity in the quarter and is on track to complete a record 7 GW of projects this year. These new additions to its portfolio provide it with additional cash flow sources.
Brookfield also continues to deploy capital into new investment opportunities. It deployed or committed to deploying $2.3 billion during the third quarter ($500 million of which it will fund directly). It’s on pace to deploy a record of more than $11 billion this year ($1.5 billion of which it will directly fund). The most recent example was buying an interest in some operating U.K. offshore wind farms ($570 million direct investment). These new investments are also adding new sources of FFO.
More growth ahead
“On the back of our strong results year to date and our outlook for the remainder of the year,” stated CEO Connor Teskey in the third-quarter earnings report, “we continue to expect to achieve our 10%+ FFO per unit growth target for 2024.” The company will continue benefiting from strong power pricing, development project completions, and accretive new investments.
The company expects to grow its FFO per share by more than 10% annually for several years. It has highly visible secured growth through 2029 and increasingly visible secured growth through 2034.
For example, the company has 6,000 gigawatt hours of hydroelectric generation available for recontracting over the next five years. Given the increasingly positive market environment for clean power, Brookfield expects to sign higher-rate power purchase agreements for this capacity as legacy contracts expire, which will contribute additional FFO in the coming years.
Meanwhile, the company continues to scale its development activities. It expects to deliver 8.4 GW of new capacity next year and 9.1 GW in 2026. Its growth rate could further accelerate in the future, powered by agreements to supply power to technology companies. For example, it has already agreed to provide Microsoft with more than 10.5 GW of new renewable energy capacity in the 2026-2030 timeframe.
Finally, Brookfield’s capital recycling strategy should continue to enhance its growth rate. The company has agreed to sell over $2.3 billion of assets this year ($1 billion net to its balance sheet), giving it capital to deploy into higher-returning new investments. It also expects to keep selling select assets to enhance its financial flexibility. Meanwhile, the company continues to find new investment opportunities. It currently has a robust pipeline of merger and acquisition opportunities valued at over $100 billion.
High-powered total return potential
Brookfield Renewable believes it can grow its FFO per share by more than 10% annually for the next decade. It has increasing visibility and confidence in this outlook thanks to its extensive development pipeline and growing demand for clean power. That earnings growth will give it the power to continue increasing its high-yielding dividend, which it aims to grow at a 5% to 9% annual rate.
Put everything together, and Brookfield could produce annual total returns in the mid-teens. That makes it look like an exceptional long-term investment opportunity.
Matt DiLallo has positions in Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
