1 Magnificent TSX Dividend Stock With 30% Upside to Buy and Hold Forever

Shares of Brookfield Renewable Partners are down 50% from all-time highs, increasing its dividend yield to more than 6%.

| More on:
data analyze research

Image source: Getty Images

Investing in megatrends may allow shareholders to generate game-changing returns over time. One such megatrend is clean energy, as several countries aim to fight climate change. The renewable energy sector is positioned to attract billions of dollars in investments in the next two decades, making Brookfield Renewable Partners (TSX:BEP.UN) a top choice right now.

An overview of Brookfield Renewable Partners stock

Brookfield Renewable Partners is a global giant operating in the clean energy sector. It is a publicly traded platform for renewable power and decarbonization solutions, with a portfolio consisting of hydroelectric, wind, solar, distributed energy, and sustainable solutions across five continents.

Typically, renewable energy and decarbonization solutions across geographies are supported by highly contracted and durable cash flows, resulting in stable earnings across business cycles. Brookfield Renewable has a proven and repeatable growth strategy combining a value investment approach with operating expertise and capital discipline.

Brookfield Renewable has managed to deliver outsized gains to shareholders in the last two decades. Since March 2004, BEP stock has returned 232% to investors. After adjusting for dividends, cumulative gains are much higher at 1,200%.

Rising interest rates and inflation have driven shares of capital-intensive companies lower in the last two years. Today, BEP stock trades 51% from all-time highs, allowing you to buy the dip and benefit from a yield of 6.3%.

The bull case for BEP stock

Brookfield Renewable navigated a challenging macro environment due to its disciplined approach to development and underwriting, allowing the company to generate record funds from operations (FFO).

BEP maintains a strong balance sheet providing it with the flexibility to deploy capital in growth projects and accretive acquisitions. Over the years, Brookfield Renewable Partners has gained massive traction in this sector, establishing itself as a clean energy behemoth. It ended 2023 with 33,000 megawatts of renewable power operating capacity and a development pipeline of 155,000 megawatts, providing investors with long-term earnings visibility.

Brookfield Renewable grew its sustainable solutions business in 2023, which now accounts for 5% of total funds from operations and may be a key driver of cash flows in the future. BEP’s global scale and large-scale decarbonization solutions provide it with a competitive moat. Over the years, BEP has evolved from a pure-play renewable energy producer, expanding its portfolio of cash-generating assets.

A dividend-growth stock

Due to its strong performance and liquidity, BEP raised dividends by 5% to US$1.42 per unit on an annualized basis. It was the 13th consecutive year where BEP increased dividends by at least 5% year over year.

With a payout ratio of less than 90%, BEP has enough room to reinvest in organic growth and acquisitions. Additionally, its payout ratio should move lower as interest rates normalize in the next two years and inflation cools off.

BEP expects to grow dividends between 5% and 9% each year and deliver annual returns between 12% and 15% in the medium term. An investment-grade balance sheet and access to diverse sources of capital will help it fund growth and meet its lofty growth targets.

Analysts remain bullish on BEP stock and expect shares to rise by 30% in the next 12 months.

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 Aditya Raghunath has positions in Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand using ATM
Dividend Stocks

Should Bank of Nova Scotia or Enbridge Stock Be on Your Buy List Today?

These TSX dividend stocks trade way below their 2022 highs. Is one now undervalued?

Read more »

A meter measures energy use.
Dividend Stocks

Here’s Why Canadian Utilities Is a No-Brainer Dividend Stock

Canadian Utilities stock is down 23% in the last year. Even if it wasn’t down, it is a dividend stock…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Got $5,000? Buy and Hold These 3 Value Stocks for Years

These essential and valuable value stocks are the perfect addition to any portfolio, especially if you have $5,000 you want…

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Magnificent Ultra-High-Yield Dividend Stocks That Are Screaming Buys in April

High yield stocks like BCE (TSX:BCE) can add a lot of income to your portfolio.

Read more »

grow money, wealth build
Dividend Stocks

1 Growth Stock Down 24% to Buy Right Now

With this impressive growth stock trading more than 20% off its high, it's the perfect stock to buy right now…

Read more »

Dividend Stocks

What Should Investors Watch in Aecon Stock’s Earnings Report?

Aecon (TSX:ARE) stock has earnings coming out this week, and after disappointing fourth-quarter results, this is what investors should watch.

Read more »

Freight Train
Dividend Stocks

CNR Stock: Can the Top Stock Keep it Up?

CNR (TSX:CNR) stock has had a pretty crazy last few years, but after a strong fourth quarter, can the top…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks Ready for Dividend Hikes in 2024

These top TSX dividend stocks should boost their distributions this year.

Read more »