Brookfield Renewable Energy Partners L.P. (TSX:BEP.UN)(NYSE:BEP) is one of Canada’s leading companies when it comes to renewable energy investments. Brookfield operates in North America, South America, and Europe, boasting a robust and diversified portfolio of renewable energy assets, focusing exclusively on non-fossil fuel sources of power generation.
The company’s $25 billion portfolio of power-generation assets are focused primarily on generating hydroelectricity (88% of the company’s renewable energy generation comes from hydroelectric systems) with total operating capacity of 10,700 megawatts.
One of the largest pure-play renewable options available to investors, Brookfield now has a market capitalization of $7.3 billion and a significant dividend yield of approximately 6%, making this company one of the most sought after renewable, blue-chip stocks available today.
I’ll dive a little bit deeper into the specifics behind the company’s assets and its fundamentals for long-term investors considering Brookfield for their portfolios.
Strong revenue contracts leading to stable and growing distributions
One feature of the company’s business model is its long-term contracted power-generation arrangements around the world. The company has approximately 90% of its revenues locked in with contracts spanning an average of 16 years; the majority of these contracts are tied to inflation-linked increases each year.
The ability of Brookfield to engage in revenue-generation contracts with a specific and measurable payout over time has allowed the company to very accurately forecast how it goes about choosing its renewable energy projects globally.
Many of the current global opportunities in renewable energy offer surprisingly high yields. While many of these projects take years to come to fruition and a significant pool of capital investment up front, Brookfield continues to be one of the fastest-growing companies in the renewables space in terms of asset generation. Much of the company’s levered free cash flow (around $900 million per year) is reinvested into new high-yield renewable energy projects.
The current dividend yield is high given the company’s earnings situation; however, the company continues to generate solid free cash flow, and all indications are that the business will not be under any pressure to lower or slow down its distributions in the future.
Over the past five years, the company has grown its dividend 6.5% per year on a compounded basis, providing income investors with great long-term yield-appreciation and capital-appreciation opportunities related to the scarcity and increasing productive value of its asset base over time.
Due to the long-term nature of the contracts Brookfield has for the majority of its operating assets, as well as the surprisingly high return the company is able to provide shareholders, this is a name every long-term investor looking for yield should consider.
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Fool contributor Chris MacDonald has no position in any stocks mentioned. Brookfield Renewable Energy is a recommendation of Dividend Investor Canada.