If you’re building a dividend portfolio, you’re likely looking for investments that pay you a stable and growing income. The safest income comes from utilities that have a history of increasing their dividends. Imagine that! As shareholders, your income from this quality business is likely to increase every year. Here’s why Foolish investors should consider Brookfield Renewable Energy Partners LP (TSX:BEP.UN)(NYSE:BEP) today.

The business

Brookfield Renewable Energy Partners LP owns renewable energy assets across seven countries. Primarily, its portfolio consists of hydroelectric generation (80%) and wind power generation (18%). Its focus areas include North America, Brazil, and Europe.

Past performance

In four years’ time, its power generation capacity has grown to 7,400 megawatts, or a compound annual growth rate (CAGR) of 13%. With the growth of assets, cash flow also increased, leading to its distributions increasing by a CAGR of 6% in the same period. Business growth also caused its share price to trend upward, leading to annualized returns of 12% in that period.

Company targets

Investors should be excited to know that Brookfield Renewable targets annualized returns of 12-15% and distribution growth of 5-9% per year. Its cash flows are predictable because 92% is contracted with inflation escalation.


What’s more to like is that on October 8, 2015, Brookfield Renewable agreed to acquire a 292 megawatt hydroelectric portfolio in Pennsylvania. The share price reacted by dipping 1.6% on the Toronto Stock Exchange.

Brookfield Renewable believes the intrinsic value of the business is actually worth US$34 per share, based on organic growth from rising power prices and the value that can be drawn from its existing projects that are in early and late stages of development. That is, no mergers and acquisitions are included in its intrinsic value calculation.

To be more conservative, we use a foreign exchange rate of CAD$1.2 to US$1. This indicates a fair value of $40.80 per share on the Toronto Stock Exchange. Based on the October 8th closing price of $35.50, the shares are discounted by 13%.


Brookfield Renewable has increased its distributions for five years in a row. It currently pays a quarterly distribution of US$41.5 per share. Based again on the above exchange rate, the shares yield 5.6% at $35.50 per share.

Distributions are like dividends, but they’re taxed differently. For shareholders, distributions likely require more work when reporting taxes, unless the shares are held in tax-advantaged accounts like RRSPs, TFSAs, or RESPs. Additionally, if the distribution consists of U.S. dividends, there will be a 15% withholding tax on that portion if the shares are held in a TFSA, RESP, or non-registered account.

However, I received the full August distribution in my TFSA without any portion of the distribution being withheld. The tricky part though is that the constituents of the distributions could change. So, the best place to buy Brookfield Renewable shares is likely in an RRSP. Interested investors can check out the “Tax Information” section of the Brookfield Renewable website to find out more.

In conclusion

Brookfield Renewable is a gift to investors today. It is a business in a stable industry. It receives most of its cash flows from long-term contracts. It pays an above-average yield of 5.6%, and the business forecasts to grow it by 5-9% every year. Finally, Brookfield Renewable expects to deliver total returns of 12-15% in the coming years.

Want more top dividend stocks?

These three top stocks have delivered dividends for shareholders for decades (and even centuries!). Check out our special FREE report: "3 Dividend Stocks to Buy and Hold Forever". Click here now to get the full story!


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Kay Ng owns shares of Brookfield Renewable Energy Partners LP.