The Canada Pension Plan, or CPP, is a taxable retirement benefit that aims to replace a portion of your pre-retirement income. In 2024, the maximum monthly CPP amount you would receive if you start your pension at age 65 is $1,364.60, while the average monthly amount is much lower at $758.32.
While the average age to start the CPP is 65, you can receive the payout as early as 60. However, Canadians should understand that the CPP amount reduces by 0.6% every month for those receiving the pension before the age of 65. So, the CPP reduces by 36% for someone starting the payment at age 60, suggesting the average payout will be around $485.
It is evident that just banking on the CPP to lead a comfortable life in retirement is not enough, given the average monthly living expenses are well over $1,000 in Canada. It’s essential to have multiple sources of income and supplement the CPP. One way to create an additional income stream at a low cost is by holding blue-chip dividend stocks such as Brookfield Renewable (TSX:BEP.UN).
The bull case for Brookfield Renewable stock
Rising interest rates have driven the share prices of capital-intensive companies lower. While tech stocks have driven the rally in 2023, shares of clean energy companies, including Brookfield Renewable, are down significantly below all-time highs.
Down 48% from all-time highs, BEP stock currently offers you a tasty dividend yield of almost 6%. Despite the pullback in valuation, BEP has returned 250% to shareholders in dividend-adjusted gains in the last decade.
While the macro backdrop remains uncertain, Brookfield Renewable added close to 5,000 megawatts of capacity in 2023. Moreover, it deployed or committed US$9 billion in new projects, which should drive future cash flows higher.
Brookfield’s funds from operations, or FFO, stood at US$1.1 billion or US$1.67 per unit in 2023, an increase of 7% year over year. It advanced commercial priorities, which include securing contracts for new developments for 50 terawatt-hours of generation.
BEP also accelerated development activities and commissioning capacities across wind, solar, and battery storage. It expects commissioned capacity to contribute US$60 million of incremental FFO annually on a run-rate basis.
Brookfield Renewable strengthened its balance sheet and executed US$15 billion of financings, finishing 2023 with available liquidity of US$4 billion, providing it with the flexibility to deploy capital at strong risk-adjusted returns.
What is the target price for Brookfield Renewable stock?
Over the years, Brookfield Renewable has established itself as a clean energy giant and is among the largest companies in this sector. Currently, it has 22 terawatt-hours per year of generation contracted to corporate customers, accounting for 30% of total contract volumes. Based on its existing development pipeline, BEP expects contract generation to corporate customers to double again by 2028 to 44 terawatt-hours per year.
Brookfield Renewable Partners continues to focus on its capital-recycling program and continues to scale with development growth, generating US$800 million of proceeds in 2023, representing three times the invested capital.
Analysts remain bullish and expect Brookfield Renewable to surge by 30% in the next 12 months.
