The world continues to try and create a better environment for our future children. Yet that future took a hit to the groin this week when electric vehicle companies provided poor production outlooks for the year.
This news comes as a struggling renewable energy sector continues to struggle further, with potentially no end in sight. So where does this leave strong, large companies such as Brookfield Renewable Partners LP (TSX: BEP.UN)?
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Buy
If you’re looking at why it could be a good idea to buy Brookfield stock, there are certainly a lot of reasons to do so for future growth. There continues to be strong demand for renewable energy in the future, with BEP stock well positioned to benefit from this growing trend.
In fact, the company continues to create partnerships and acquisitions to drive organic and acquisition growth. And with record growth underway, it has been increasing its dividend regularly as well. That looks like a stable position as well, given that the company has strong and reliable cash flow from long-term contracts.
Add in that BEP stock also produced record results recently. The company reported a record US$1.1 billion in funds from operations (FFO) for the last year. The fourth quarter also saw a 9% increase in FFO year over year. The company went on to increase its dividend by 5% as well, with a share buyback plan in place.
Sell
You might be thinking, “All this great news, so why are shares half of where they were in 2021?” It’s a good question, and comes down to both macro and micro factors. BEP stock trades within the volatile renewable energy stock market. This area is susceptible to huge fluctuations, as we’ve seen. And that may not go away any time soon.
Sure, interest rates have made it hard for the company to expand. This comes down to taking out loans for more acquisitions and growth. But even after that, there is a lot of competition and a lot of regulatory hurdles to constantly jump over.
Plus, BEP stock may have projects in mind for the future, but these are all at risk. While diversified, these assets may prove worthless in the years to come should it focus too much on one area like wind power, and less on another like solar. Overall, it doesn’t look like a risk-free investment right now. Especially while trading down 13% in the last year alone.
Hold
Alright, but what if you already own BEP stock? Like *ahem* myself. Well, it really comes down to many of the points we’ve already gone over. There continues to be long-term demand for renewable energy. There continues to be expansion. It has a long history of growth, and has consistently delivered cash flow.
That goes right up to today with record results during the last quarter. And what’s more, those results include the long-term contracts I discussed. And while we might shift to one type of renewable energy over another, the diversification is key in the next decade at least. Whether it’s uranium or solar power, the company can provide it.
What’s more, the renewables asset owner and operator stands to make huge gains from being an incredibly large company, with plenty of cash to invest, and an experienced management team. But the best short-term reason? Its dividend yield at 6% as of writing. So don’t give up on BEP stock quite yet.
