As the dividend yield and stock price are inversely related, it makes sense to identify quality companies that have underperformed in recent months to benefit from an attractive dividend payout.
One such TSX dividend stock is Brookfield Renewable Partners (TSX: BEP.UN), which is down 34% from all-time highs and offers you a tasty yield of 5.3%.
Valued at a market cap of almost $25 billion, Brookfield Renewable owns a portfolio of clean energy facilities in the Americas. It generates electricity through hydro, wind, solar, distributed generation, and pumped storage.
BEP also offers sustainable solutions, including renewable natural gas, carbon capture and storage, recycling, cogeneration, biomass, nuclear services, eFuels, and power transformation.
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Is Brookfield Renewable stock a good buy right now?
Brookfield Renewable Partners delivered strong third-quarter results with funds from operations (FFO) reaching US$302 million, representing 10% year-over-year growth as the company positions itself at the centre of an unprecedented nuclear power revival.
Brookfield announced a transformational US$80 billion agreement with the U.S. government to construct new Westinghouse nuclear reactors across America. This big-ticket contract indicates a notable shift in the renewable energy landscape driven by surging electricity demand from data centres.
The nuclear deal is a key catalyst for Westinghouse, which Brookfield and Cameco acquired in 2023. Under the agreement, the U.S. government will order at least US$80 billion worth of Westinghouse reactors with the goal of having 10 large-scale reactors under construction by 2030.
The government will arrange financing, facilitate permits, and provide federal lands to accelerate deployment. Westinghouse currently services over 50% of the global nuclear fleet, with two-thirds of the world’s operating reactors derived from Westinghouse technology.
Management expects revenue contributions from the nuclear partnership to begin within the next few quarters as development work commences. The most profitable period will occur during the three- to six-year construction phase, followed by 60- to 80-year annuity streams from fuel supply and maintenance contracts.
The deal includes a profit-sharing arrangement, under which the U.S. government receives 20% of Westinghouse’s distributions only after current shareholders have received $17.5 billion in distributions.
Beyond nuclear, Brookfield is seeing accelerating demand for its hydroelectric assets as hyperscalers seek baseload power sources. The company has signed a 20-year contract with Microsoft at a hydroelectric facility in PJM and continues to expand its framework agreement with Google.
With approximately five terawatt-hours of hydro generation coming up for recontracting, Brookfield expects higher pricing to lift cash flows, while enabling upfinancing opportunities to provide additional growth capital.
The company executed US$7.7 billion in financings during the quarter, bringing the 12-month total financings to US$38 billion. Brookfield also accelerated capital-recycling efforts, closing sales worth US$2.8 billion of enterprise value and implementing an aggressive asset rotation program at recently acquired Neoen that has monetized US$1.1 billion in less than a year.
Management maintains a strong liquidity of US$4.7 billion with a BBB+ investment-grade rating, while targeting long-term total returns of 12% to 15% for investors across an expanding portfolio that now exceeds 200 gigawatts of operating fleet and development pipeline.
Is this TSX dividend stock undervalued?
Analysts tracking the TSX dividend stock forecast adjusted FFO to expand from US$1.69 in 2024 to US$2.35 in 2028. The clean energy giant has increased its annual dividend per share from US$0.95 in 2016 to US$1.42 in 2024, and analysts forecast dividends to rise to US$1.65 per share in 2029.
With a payout ratio of 81% in 2025, BEP’s dividend payout is sustainable, given its long-term growth drivers.
If the TSX stock is priced at 15 times FFO, it should gain 20% over the next two years. After we adjust for dividends, cumulative returns could be closer to 30%.
