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I Love Brookfield Renewable for 1 Reason, and It’s Not the Dividend

The Motley Fool · 19h ago

Key Points

  • Brookfield Renewable has grown its FFO per unit by 12% over the past year.

  • The company plans to scale new construction to about 10 GW in 2027 and 11 GW in 2028.

  • That supports its expectation of continued double-digit FFO-per-share growth.

Plenty of investors own Brookfield Renewable (NYSE:BEPC)(NYSE:BEP) for the dividend. With a 5% yield and 17 years of delivering at least 5% annual dividend growth, it's a high-quality income stock.

However, Brookfield's dividend isn't the main thing I like about the renewable energy stock. What I love about Brookfield is its high-powered growth rate, which significantly enhances its total return potential.

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Brookfield logo over a blue-tinted landscape of wind turbines and solar panels.

Image source: The Motley Fool.

Not your average dividend stock

Brookfield Renewable recently reported its third-quarter results. The clean energy company generated $0.51 per unit of funds from operations (FFO), up 11% year over year. Meanwhile, it has grown its FFO per unit by 12% over the last 12 months. That's robust growth for a company with a 5% dividend yield.

The company has multiple growth drivers, including inflation-linked rate increases, rising margins, development projects, and its value-enhancing capital recycling strategy. Brookfield has invested about $700 million in two new businesses over the past few months (Boralex and Aypa), funded by $850 million in asset sales. Meanwhile, it has delivered 5.6 gigawatts (GW) of new renewable energy capacity so far this year. These investments should support its continued growth.

Brookfield expects to deploy more than $11 billion in capital over the next five years. It's ramping up its renewable energy development capabilities, with 10 GW expected to be delivered next year and 11 GW in 2028, while continuing to pursue M&A transactions. These and other catalysts drive its expectation of delivering more than 10% annual FFO per share growth going forward. Add that to its 5%-yielding dividend, and Brookfield's total returns could approach 15% annually.

While Brookfield's high-yielding dividend is nice, its strong growth rate is what positions it to deliver high-powered total returns in the coming years.

Matt DiLallo has positions in Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.