Brookfield Renewable Stock Is Down 19% in 4 Months: Buy the Dip?

Brookfield Renewable Partners stock continues to drive cash flows and dividends as energy demand continues to rise.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published September 21, 8:00 pm EDT

| More on: BEP.UN

Key Points

• Brookfield Renewable stock has fallen 19% in four months despite posting record Q2 funds from operations of $421 million (up 13%), driven by strong performance across its diversified global renewable energy portfolio.
• The company's Westinghouse nuclear business surged 60% in Q2 FFO as demand grows for reactor life extensions, restarts, and servicing, while battery storage presents the most compelling near-term growth opportunity.
• Brookfield targets 10%+ annual FFO growth and 5-9% distribution growth with $5.1 billion in liquidity to deploy, making the recent stock dip an attractive buying opportunity amid accelerating global electricity demand.

Things are looking good for Brookfield Renewable Partners LP (TSX: BEP.UN), as the company looks forward to significant growth opportunities. Simply put, global electricity demand is accelerating and there isn’t enough capacity. And the energy grid infrastructure is lacking.

Brookfield Renewable stock is extremely well-positioned in this environment. So why is the stock down 19% in just four months?

sources of renewable energy — Source: Getty Images

A global powerhouse

As one of the most differentiated businesses in the global power sector, Brookfield Renewable stock is in an enviable spot.

Its business is diversified – across geographies and across energy sources. Brookfield delivers secure, low-cost integrated energy solutions at scale. From its low-cost, fast-to-market solar and wind projects to its hydro and battery storage projects, Brookfield is meeting the rapidly rising global energy demand profile.

Brookfield’s latest results

A quick scan of Brookfield Renewables latest results shows the strength and potential of the company. In the second quarter, Brookfield reported record funds from operations (FFO) of $421 million or 62 cents per share. This represented a 13% and 11% increase, respectively, driven by strong performance across all businesses.

Notably, Brookfield Renewable Partners reported formidable strength in its nuclear business, Westinghouse, which is the world’s leading nuclear technology provider. FFO increased 60% in the second quarter, and it was supported by positive industry fundamentals.

Nuclear power provides reliability, scale, energy security, and carbon-free baseload generation. It’s essential in the global energy mix. Existing reactors have value that’s hard to replicate. As such, the sector is pursuing reactor life extensions, restarts, and newbuild programs. This is resulting in increased demand for servicing and maintenance in the nuclear sector. Accordingly, the outlook is bright for Brookfield’s Westinghouse.

Brookfield Renewable Partners stock falls

Yet, despite all of this, Brookfield Renewable’s stock price has been hit. As you can see from the graph below, it has dipped as low as $40 just last week. And today, it’s down almost 20% compared to four months ago.

Fundamentally, Brookfield continues to do well, as we have seen with its recent results. Cash flow growth, and dividend growth and reliability have all been trademarks of the stock. Looking ahead, Brookfield will continue to expand capabilities across technology and markets with the strongest demand. Currently, battery storage is the most compelling opportunity.

Battery storage expands the hours that renewable energy can meet demand, and it provides flexibility and improved grid reliability. This is important as hyperscalers and governments increasingly need reliable dispatchable power alongside low-cost, fast-to-market renewable generation to support rapidly growing electricity demand.

Brookfield Renewable Partners has a strong balance sheet and over $5.1 billion of liquidity available to help put this plan into place. The company is targeting long-term annual FFO growth of 10% or more, distribution growth of 5% to 9%, and total annual returns of 12% to 15%.

The bottom line

Brookfield Renewable’s stock price is presenting investors with an attractive opportunity to buy into a company that’s thriving as energy needs are rapidly growing. Brookfield has a broad list of opportunities ahead to continue to participate in this growth and reward its shareholders along the way. I’m buying the dip.