People invest in stocks for money growth, if not to prosper financially. However, those who want to compound their money or maximize returns would stay invested longer. If your objective is the same, a TSX renewable energy stock is suitable for long-term investors.
The renewable energy sector offers massive opportunity, and while it’s still less profitable, it should accelerate rapidly. As more governments transition from fossil fuels to green energy, expect the global renewable energy market to swell enormously.
More importantly, renewable resources are abundant, and their lifespan is infinite. And for prospective investors, you’re investing money for the good of the planet.
Top-of-mind choice
Brookfield Renewable Partners (TSX: BEP.UN) is fast-rising as a the top-of-mind choice in the renewable energy space. This $7.3 billion renewable power generating company’s asset portfolio consists of all renewable energy sources (hydroelectric, wind, and solar). In addition to renewable power, the platform provides decarbonization solutions.
Management implements a repeatable growth strategy and capitalizes on Brookfield Renewable’s diverse portfolio to generate high-quality cash flows. The target is to deliver 12% to 15% total returns and 5% to 9% annual distribution growth. Suppose you invest today, BEP.UN trades at $35.92 per share (+6.2% year-to-date) and pays a 5.6% dividend.
Given the share price, yield, and quarterly payout frequency, a $7,184 investment (200 shares) will produce $100.04 in passive income every three months.
Record Year
Brookfield Renewable aims to become a global clean energy supermajor. Its CEO, Connor Teskey, said 2023 was a record year despite the rising rate environment and supply chain challenges. In the 12 months ending December 31, 2023, the net loss of US$100 million was 66.1% lower than in 2022, while funds from operations (FFO) increased 9% year-over-year to a record US$1.1 billion.
In Q4 2023, net income reached US$35 million compared to the US$82 million net loss in Q4 2022. As of year-end 2023, the operating and development capacity reached 166,000 MW. Brookfield deployed (or agreed to deploy) $9 billion in capital for accretive investments across its key markets.
The commissioned projects (a record of 3,400 MW) over the last 12 months contributed US$50 million in FFO. Teskey added that the favourable results were due to the diverse asset base, high-quality inflation-linked and contracted cash flows, organic growth, and contributions from acquisitions.
Brookfield Renewable allocated a portion of capital to share repurchases and increased dividends by 5%. Management hopes to generate the best risk-adjusted returns to continue creating meaningful value for investors.
Latest financial performance
In Q1 2024, revenue rose 12.1% year-over-year to US$1.5 billion. The net loss topped US$70 million versus the US$177 million net income due to higher interest and depreciation expenses from business growth and the weakening of the U.S. dollar relative to 2023.
Nonetheless, Teskey told unitholders that Brookfield Renewable had a strong start to the year. At the quarter’s end, the company had $4.4 billion in available liquidity, which it could allocate for business growth.
Ready for increasing clean energy demand
Brookfield Renewable maintains a positive outlook and is ready to meet the increasing demand for clean energy. The company anticipates further strengthening its renewable power assets as interest rates soon stabilize. According to management, the chances of delivering 12% to 15% long-term total returns are high.
