Investing in renewable energy stocks can be appealing for multiple reasons. The sector is witnessing rapid growth driven by increasing global demand for clean energy and efforts to combat climate change. As governments announce and implement policies to cut carbon emissions and shift towards green energy sources, companies in this sector stand to gain from increased demand for their products and services.
Additionally, governments across the globe provide incentives and subsidies to support the growth of the renewable energy industry. Such incentives include tax credits, grants, and favourable regulatory policies, which can help renewable energy companies expand their operations, improve their financial performance, drive their share prices higher, and support dividend payments.
Moreover, adding renewable energy stocks to your investment portfolio will help spread risk and improve overall portfolio performance.
With this backdrop, let’s look at Brookfield Renewable Partners (TSX:BEP.UN), a top Canadian stock, to find out whether it is a buy right now to capitalize on the energy transition opportunities.
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Why Invest in Brookfield Renewable Partners?
Brookfield Renewable Partners is a leading company in the green energy space thanks to its diversified portfolio of renewable power assets, including wind, solar, and hydroelectric. It owns and operates clean energy generating facilities and provides decarbonization solutions. The company is rapidly growing and has almost 33,000 megawatts of renewable power operating capacity and an approximately 155,000-megawatt development pipeline.
Notably, the bulk of Brookfield’s power output is under contractual arrangements. Moreover, these contracts have a long weighted average remaining life and safeguards against inflation. This adds stability and visibility to cash flows and drives the company’s organic growth.
Brookfield Renewable Partners consistently generates solid financials thanks to its diversified asset base and long-term contracts. This enables the company to return significant cash to its shareholders through higher dividend payments and share repurchases. Notably, Brookfield Renewables Partners’ funds from operations (FFO) sport a compound annual growth rate (CAGR) of 10% from 2012 to 2023. Furthermore, its dividend distributions increased by a CAGR of 6% during the same period.
Further, its stock has grown at a CAGR of over 13% in the past decade, gaining more than 243% in value during the same period.
Looking ahead, the company is scaling its development capabilities and pulling forward its pipeline. Notably, its advanced-stage development pipeline now stands at almost 24,000 megawatts, with just under 7,000 megawatts on track to be delivered in 2024 and 7,000 megawatts in 2025. These projects will soon fully secure power purchase agreements and construction contracts and are expected to contribute significantly to its FFO.
Further, Brookfield is diversifying its cash flows and enhancing the contracted components of its business. This move will help minimize volatility, stabilize its performance, and drive steady earnings growth.
Bottom Line
Brookfield Renewable Partners’ well-diversified assets, long-term contractual arrangements, solid developmental pipeline, and strong balance sheet position it well to capitalize on the demand for green energy. The company could continue generating solid earnings, distributing higher dividends, and delivering above-average capital gains.
