Income Investors: A Top Dividend Stock to Go Green

Get juicy income and secular growth from Brookfield Renewable Partners LP. (TSX:BEP.UN)(NYSE:BEP) stock!

| More on:
Man pointing at a recycling symbol

Image source: Getty Images

There’s a secular shift toward renewable power to reduce the emission of greenhouse gases. To transform to a world of 30-50% renewables, new investments of about US$850 billion to US$5 trillion are needed.

Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) will be a big beneficiary as the owner and operator of one of the world’s largest renewable power portfolios. Its platform is composed of more than 17,400 MW of capacity and 880 generating facilities in North America, South America, Europe, and Asia.

Its operational expertise is unmatched. Not only does the company have 120 years of experience in power generation, but it also has full capabilities in operating, development, and power marketing.

Brookfield Asset Management is both a general manager and partner who owns a significant stake of 60% in Brookfield Renewable. So, the owner and operator has strong interest alignment with BEP shareholders.

Safe dividend yielding 6%

Brookfield Renewable’s cash flow is diversified across hydro generation (75% of cash flow), wind generation (21%), and solar generation (4%). About 60% of the cash flow is generated in North America, 35% is from Latin America and Asia, and 5% is in Europe. Its stable dividend is supported by 87% of cash flow that are contracted.

As of writing, BEP stock offers a yield of about 6%. Notably, it pays out a U.S. dollar-denominated cash distribution of US$2.06 per unit based on its current quarterly distribution. So, the changing foreign exchange rate between the U.S. dollar and the Canadian dollar will affect the effective yield that Canadian investors receive.

Growth from coins

The company has increased its dividend for nine consecutive years with a three- and five-year dividend growth rate of 5.7% and 6.2%, respectively. Based on its usual schedule, the renewable power stock will increase its cash distribution in the first quarter.

Going forward, management aims to increase the dividend by 5-9% per year, which will be reinforced by cash flow growth from inflation escalation, re-contracting, cost reduction, and development and repowering, which will also generate extra cash flow to reinvest into the business.

Tax on the cash distribution

Brookfield Renewable stock is a qualified investment for RRSPs, deferred profit-sharing plans, RRIFs, RESPs, RDSPs, and TFSAs. However, it’s a Bermuda-based limited partnership. So, its cash distribution consists of various types of investment income, including interest income, dividend income, and return of capital, from subsidiary corporations that operate in different jurisdictions.

Therefore, its cash distribution is taxed differently from dividends, and investors should consult their tax advisors to determine which account is best to invest the stock in.

Foolish takeaway

Investors who want to ride on the secular trend of going green with renewables should consider a position in Brookfield Renewable stock, which offers a juicy yield of 6%. The income stock will especially be attractive on dips of more than 10%.

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 Kay Ng owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. The Motley Fool owns shares of Brookfield Asset Management and BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »