This Canadian Utility Stock Is Positioned for Long-Term Growth

Let’s dive into whether Brookfield Renewable (TSX:BEPC) is a fit for most investor portfolios or if now is the time to wait on this name.

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In this era of electrification and artificial intelligence (AI), we’re going to need a lot more electricity. Power generation companies have generally been viewed as long-term dividend stocks to buy for passive income. And they still are. But one Canadian utility stock I think investors may want to consider for a range of longer-term catalysts is Brookfield Renewable (TSX:BEPC), a company with the ability to ride some pretty robust secular growth trends higher over time.

Let’s dive into why this particular utility stock is worth considering right now.

Clean energy is the future; we all know it

Putting the debate around whether climate change is real or not, it’s becoming increasingly clear governments and individuals around the world would prefer a future with more green energy and not less. We’re seeing incredible demand growth for electricity that’s able to be generated near large metro areas and done so in a sustainable fashion.

Brookfield Renewables’s portfolio of diversified clean energy assets provides such clean energy to a number of key regions in North America, South America, Europe, and Asia. The company currently has an installed capacity of 21,000 megawatts of energy and has plans to increase this number significantly over time.

As demand for clean energy rises, investors may expect some additional pricing power to materialize over time. If that’s the case, this company could be well-positioned to provide even greater earnings growth.

The numbers make sense

From an earnings perspective, there’s certainly a lot to like about Brookfield Renewables and its current valuation. Trading at less than four times earnings, Brookfield Renewables is able to not only invest in its core asset base but pay out a very juicy 4.8% dividend. At current rates, this model appears to be highly sustainable. And if more pricing power and government investment is seen over time, these numbers could feasibly improve in a big way.

Interestingly, the market doesn’t appear to be sold on this company despite its strong recent results. In the first quarter of 2024, Brookfield Renewables reported an 8% year-over-year rise in funds from operations, with earnings per share coming in at US$0.45 per unit and available liquidity of US$4.4 billion. Given this stock trades at a market capitalization of a little more than $5.2 billion at the time of writing, investors are able to get the company’s core assets for almost free. That seems like a steal to me.

Bottom line

I think the secular tailwinds supporting Brookfield Renewables’s recent rise will be here one, five and 10 years from now. Accordingly, this is a value stock, and I think it should be considered given its strong fundamentals and balance sheet. Indeed, at its current valuation, there are few utility stocks out there that can match this one right now.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Renewable. The Motley Fool has a disclosure policy.

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