Brookfield Renewable Partners (TSX:BEP.UN) has created massive wealth for long-term shareholders. After adjusting for dividends, the clean energy giant has returned 328% in the last 10 years and a staggering 1,450% since January 2004, easily outpacing the broader markets.
As past returns don’t matter much to current and future investors, let’s see if the TSX stock can continue to derive outsized gains in 2024 and beyond.
Brookfield Renewable stock is under pressure
Companies in capital-intensive sectors such as energy, utilities, and real estate are feeling the heat of rising interest rates. As the cost of debt has more than tripled in the last two years, rising interest payments have led to an erosion of profit margins for companies across sectors.
Despite its stellar returns, BEP stock currently trades 42% below all-time highs, valuing the company at $24 billion by market cap. However, the pullback has also increased the stock’s dividend yield to almost 5%, making it attractive to income-seeking investors.
Brookfield Renewable is one of the largest clean energy companies globally. With a presence on five continents, it has a diversified portfolio of hydroelectric, solar, wind, and distributed energy.
How did Brookfield Renewable Partners perform in Q3 of 2023?
Despite a challenging macroeconomic backdrop, Brookfield Renewable performed well in the third quarter (Q3) of 2023. It delivered solid growth in funds from operations or FFOs while advancing its development program, with 5,000 megawatts of capacity expected to be delivered in 2023.
It ended the quarter with US$4.4 billion in total liquidity, providing the company with the flexibility to execute its growth and development strategy.
In Q3, Brookfield Renewable generated an FFO of US$253 million, or $0.38 per share, which means its FFO has risen to US$1.29 per share in the last three quarters, rising 7% year over year.
Brookfield Renewable is forecast to grow its FFO by 10% in 2023 on the back of accretive acquisitions and organic growth.
A focus on acquisitions
Brookfield Renewable is aggressively targeting acquisition to gain traction in the clean energy space. It recently completed the acquisition of X-Elio, a global solar developer.
BEP also closed the acquisition of Deriva Energy, one of the largest renewable platforms south of the border, with 5,900 megawatts of capacity and a 6,100-megawatt development pipeline.
Brookfield Renewable expects to deploy over US$1.5 billion of capital towards acquisitions, which may add US$200 million in incremental annual FFOs.
What’s next for BEP stock price?
Brookfield Renewable aims to increase FFOs by 10% each year through 2028, supporting annual dividend hikes between 5% and 9% in this period.
Given its FFOs are forecast at US$1.69 per share in 2023, the company should end 2028 with an FFO of US$2.72 per share. It currently trades at 16 times cash flows, which is not too high given its tasty dividend yield and growth forecasts.
If it is valued at a similar multiple, BEP stock should surge over 50% in the next five years. Moreover, if BEP stock is valued at 20 times FFOs, the stock should double in the next five years.
