Any renewable power company has strong conceptual appeal for investors.
The best renewable power stocks, like this one, get most of their revenue from guaranteed, long-term contracts and a diverse mix of hydroelectric, wind and solar power.
The stock trades at 26.4 times the company’s 2021 earnings forecast.
BROOKFIELD RENEWABLE PARTNERS L.P. (Toronto symbol BEP.UN; www.bep.brookfield.com) lets investors gain exposure to 219 hydroelectric generating stations, 104 wind farms and 4,969 solar-power facilities. In all, they produce over 19,317 megawatts of generating capacity.
Over the last decade, Brookfield has cut its risk for investors by diversifying its operations across hydro, wind and solar, as well as geographically. It now sells power to over 600 high-quality customers. Currently, the company sells 95% of its power under guaranteed contracts with public power authorities and utilities (with an average contract length of 14 years). Meanwhile, Brookfield has access to over $3 billion in cash and credit lines. That will let it weather any further COVID-19 disruptions, but also seek out timely acquisitions, perhaps at distressed prices.
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In the quarter ended March 31, 2021, much stronger power generation pushed up the company’s cash flow per unit by 21.2%, to $0.40 U.S. from $0.33 a year earlier.
Dividend Stocks: New contracts and acquisitions add assets and cash flow
Brookfield recently sold some U.S. onshore wind assets for $733 million U.S. to NextEra Energy (New York symbol NEP). Brookfield is selling the operations because it feels solar assets have a better future than wind projects.
The company has agreed to buy a portfolio of solar assets from U.S. energy giant Exelon Corp (Nasdaq symbol EXC).
The additional 360 megawatts of solar electricity production is spread across nearly 600 sites throughout the U.S. The assets also include 700 megawatts under development. The total purchase price is $810 million U.S.
The portfolio gives Brookfield a total of 2,000-plus megawatts of solar power production.
Following the deal, solar power will make up 9% of Brookfield’s cash flow, and the partnership plans to keep expanding in that area. Meanwhile, the Excelon assets are all contracted under long-term power purchase agreements. That cuts the risk of the acquisition.
Brookfield also recently secured a new long-term contract to supply electricity to Plug Power Inc. (Nasdaq symbol PLUG). That firm makes hydrogen and fuel cell products for industrial businesses in the U.S. and Canada. One primary use of its fuel cells is to power forklifts and other machinery-handling equipment in warehouses.
With the March 2021 payment, Brookfield raised its quarterly distribution by 5.0%, to $0.3038 U.S. a unit from $0.2893 U.S. The new annual rate of $1.215 U.S. yields a reasonable 3.0%. The partnership aims to raise the annual payment by 5% to 9% each year.
Brookfield’s cash flow should total $1.48 U.S. a unit in 2021, and the stock trades at 26.4 times that forecast.
Just a question regarding BEP.UN. I also subscribe to VectorVest. They show negative earnings per share and declining sales. It also appears they are paying more to share in dividends than projected cash flow per share. Is this correct? What makes this company good buy? Thanks
Thanks for your comment. Brookfield Renewable cuts investor risk by selling power from its plants under long-term contracts. This provides the company with stable cash flows that cover their dividend payout.
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Just a question regarding BEP.UN. I also subscribe to VectorVest. They show negative earnings per share and declining sales. It also appears they are paying more to share in dividends than projected cash flow per share. Is this correct? What makes this company good buy? Thanks
Thanks for your comment. Brookfield Renewable cuts investor risk by selling power from its plants under long-term contracts. This provides the company with stable cash flows that cover their dividend payout.
The future is now! Good review and recommendation.