The Canadian market has moved upwards significantly since January, making stocks relatively more expensive than they were a month ago. Last fall, deals abounded for dividend stocks, but those opportunities are not as generous as they once were. Nevertheless, there are still some decent deals out there for investors hoping to capitalize on generous yields.
The Brookfield name is associated with a number of great companies focused on the acquisition of real estate assets around the world. With its desire to build a portfolio of office, residential, and infrastructure assets, Brookfield has developed a diversified portfolio that continues to generate solid returns year after year.
As a yield play, Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) is certainly one of the best in the group. Its yield of just under 7% at the current share price is quite attractive for income investors. Its U.S. dollar-denominated yield also provides a boost to the total return, as investors benefit from a strong currency conversion rate.
The company has 877 generating facilities that are located around the world, giving investors a large degree of diversification. BEP specializes in purchasing undervalued assets anywhere in the world — a strategy that most North American utility companies cannot easily replicate. Many of these assets are regulated, giving BEP clear visibility for future capital expenditures and distribution coverage.
The majority of those assets have been focused on wind, solar, and hydro assets. In Europe, for example, BEP has been growing its presence in countries such as the U.K. and Iberia. In that continent, the company has 3,700 MW of operating wind, solar, and storage and a 1,500 MW development pipeline to bolster its diversified portfolio. Its emerging market properties, like its Brazilian wind assets, help spread risk globally, with weakness in one market being offset by strength in another.
One thing investors need to be aware of is that this is a limited partnership, so the company pays a distribution, not a dividend. This fact results in tax implications that are different from that of a company that pays eligible dividends for tax purposes.
Even with its high distribution yield of over 6%, the company is still confident in the long-term viability of the payout. BEP is targeting annual increases of 5-9%, meaning that there is some serious distribution growth still to come in the future.
The distribution growth will be powered by BEP’s steady operational performance. In the third quarter of 2018, BEP grew funds from operations by 15% over the same quarter of 2017. Over the long term, BEP aims to generate total returns for investors to the tune of 12-15%. Considering the growth in funds from operations, the company appears to be on track to meet this goal.
Finding companies with strong growth prospects, yield stability, and the potential for capital growth can be challenging. Investing in Brookfield subsidiaries like BEP has proven to be one way investors can invest globally in stable, real assets. With its high and growing yield, diverse portfolio of assets, and a solid growth plan, BEP is a stock you can add to your income portfolio with confidence.
