Get Ready for This Renewable Energy Stock Yielding 4.5% to Soar Higher in 2020

Even after gaining 69% in 2019 Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) has plenty of upside left.

| More on:
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

Image source: Getty Images

Last year leading renewable energy utility Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) soared by an impressive 69% substantially outperforming the S&P/TSX Composite Index, which despite reaching a record high, only delivered 19%. There are indications that even after that strong performance, the stock is poised to rise further and deliver considerable value during 2020.

Diversified portfolio

Brookfield Renewable owns a globally diversified portfolio of renewable energy assets covering 15 countries across North and South America, Western Europe and Asia.

That portfolio has installed capacity of 18,000 megawatts (MW), of which 74% is generated by hydroelectric plants and the remainder from wind and solar facilities.

North America is responsible for 62% of the electricity generated by the partnership’s assets followed by Latin America and Asia at 33% with the remainder being produced in Europe.

That emphasizes the importance of North American energy markets for Brookfield Renewable Partners and its ability to grow earnings.

The business solid performance for the first nine months of 2019 was responsible for boosting its market value and the strong gains made during 2019.

After struggling to unlock value from its power portfolio, Brookfield Renewable finally reported some solid operational numbers, including actual electricity generation for the period rising by almost 7% year over year to 40,095 gigawatt hours (GWh).

The increase in electricity output was driven by improved hydrology lifting the performance of the partnership’s hydro segment and the addition of new wind assets.

That was also 2% greater than the projected long-term average and a key driver of Brookfield Renewable’s notable financial performance since the start of 2019.

The partnership reported net income of US$7 million compared to a US$49 million loss a year earlier, while funds from operations (FFO) has shot up by an impressive 27% per unit. Initiatives aimed at controlling costs and boosting the price of the electricity sold also contributed to higher FFO and net income.

There is every indication that Brookfield Renewable’s electricity output and earnings will continue to grow at a solid clip throughout 2020. During 2019, Brookfield Renewable’s subsidiary TerraForm Power completed the acquisition of a large-scale U.S. electricity distribution business with 322 MW of capacity.

Brookfield Renewables also closed added 200MWs of wind assets in China and commissioned 8MWs of solar rooftop assets. These latest additions will bolster the amount of power generated further lifting earnings and cash flow during 2020.

At the end of the third quarter 2019, Brookfield Renewables had 151MWs of hydro, wind and solar assets under construction, which are expected to enter service by the end of 2021.

Collectively, these are expected to add US$11 million to the businesses FFO, further increasing its earnings over the course of 2020 and into 2021.

The ongoing fight against climate change and global warming, which sees many nations implementing aggressive clean energy targets, will act as a powerful long-term tailwind for Brookfield Renewable, further enhancing its earnings growth.

Aside from an increased asset value and higher earnings boosting Brookfield Renewable’s market value, growing cash flow will also support further distribution hikes.

The partnership has increased its distribution for the last nine years straight, giving it a juicy 4.5% yield. The payment certainly appears sustainable given that it has a payout ratio of around 83% of FFO and that earnings as well as funds flow will keep growing. Brookfield Renewable anticipates growing that distribution by 5% to 9% annually with FFO projected to expand by 6% to 11%.

Foolish takeaway

Brookfield Renewable possesses considerable growth potential which will see its earnings and hence market value rise solidly over the course of 2020.

In conjunction with its wide economic moat, strong defensive characteristics and high likelihood of further distribution hikes, it will deliver significant value, making now the time to buy.


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 Matt Smith has no position in any of the stocks mentioned. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.

More on Dividend Stocks

money cash dividends
Dividend Stocks

Passive Income: How Much to Invest to Get $800 Per Month

If you need high current income, you can explore these dividend stock ideas. In the long run, you can expect…

Read more »

Retirement plan
Dividend Stocks

3 Best Ways to Invest for Retirement 

Are you worried about retiring in a weak economy? Here are three ways to invest for retirement while hedging against…

Read more »

Couple relaxing on a beach in front of a sunset
Dividend Stocks

TFSA Couples: How to Make $800/Month in Tax-Free Income

With a cumulative contribution room of $176,000 TFSA couples can easily generate more than $800 in monthly dividend income.

Read more »

grow dividends
Dividend Stocks

3 Tips to Make More Money Investing

You can make more money by avoiding losers. Populate your diversified stock portfolio with quality dividend stocks!

Read more »

green energy
Dividend Stocks

Is Fortis Stock a Buy in March 2023?

Looking for a great stock to buy in March 2023? Prospective investors should take a closer look at what Fortis…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Buy Alert: 2 Top-Dog Dividend Stocks Are Trading Near 52-Week Lows

Telus and Nutrien are terrific dividend stocks that you shouldn't fear if they sink further.

Read more »

protect, safe, trust
Dividend Stocks

2 of the Safest Dividend Stocks on the TSX

These dividend-paying stocks tend to be less volatile than the overall market.

Read more »

grow money, wealth build
Dividend Stocks

Stop Hoarding Cash! Buy 281 Shares of This Stock Instead to Get $955.40 in Annual Passive Income

Timing isn't everything, but when the market is down this much, it can certainly help you achieve your investment goals…

Read more »