The Motley Fool

Should You Buy Brookfield Renewable Partners LP After its 5% Dividend Increase?

Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) reported its full-year 2017 results earlier this month, and management increased the dividend by 5%, which is in line with the yearly expected dividend increase of 5-9%. With investors now earning US$1.96, or $2.49, per year in dividends, it might be a good time to start picking up shares.

Across the board, the 2017 results were strong. Actual generation was 43,385 GWh for the year, with Brookfield Renewable’s portion at 23,968 GWh. Brookfield Renewable’s portion last year was 20,222 GWh, so there was solid growth there. Proportionate adjusted EBITDA came in at US$1.142 billion, up from US$942 million the year prior, while funds from operations (FFO) came in at US$581 million compared to US$419 million the year prior.

It helps to understand a key part of the above results: Brookfield Renewable’s portion. Brookfield Renewable is the renewable energy spin-off of Brookfield Asset Management Inc. Brookfield Renewable acts as the manager and then, with its parent, pulls together a consortium of investors to buy major assets. Brookfield Renewable then puts a part of the buying price in, so it gets exposure to an asset pro rata.

Here’s an example.

On October 16, 2017, Brookfield Renewable completed the acquisition of TerraForm Global and the 51% acquisition of TerraForm Power Inc. The total price tag for the business was US$750 million, but Brookfield Renewable only put in US$230 million. That means it owns 31% of the total operation, which gives it direct exposure to 952 MW of energy.

Brookfield Renewable manages the entire portfolio for the other investors in the deal. CEO Sachin Shah explained that “we can run the assets, we can do the O&M [operations & maintenance] in-house, we can reduce the cost structure of this business, and we can ultimately reposition it for growth in the future.”

Once the asset has been acquired, Brookfield Renewable then goes about streamlining operations and, where it makes sense, investing in the asset to boost power generation. In 2017, the company commissioned 75 MW of new capacity. It also moved forward with an additional 248 MW in various projects that are expected to come online in a commercial sense in the next four years.

So, what does the future hold for Brookfield Renewable?

One small point jumped out at me in the earnings release: “…while making small investments in India and China, establishing an operating presence in these markets to support future growth.” India and China are the two most populated countries in the world and are both desperate for energy generation. I wouldn’t be surprised to see Brookfield Renewable pick up assets in either of those countries over the coming years; it’s really a no-brainer.

With a rising dividend and a strong business model that should help the company continue to grow, I see little reason why investors wouldn’t want to pick up shares of this stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jacob Donnelly has no position in any of the stocks mentioned. The Motley Fool owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.

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