This Canadian power generation stock recently raised its distribution again.
A series of recent acquisitions should help keep the firm’s cash flow rising—it was up 12.7% in the latest quarter. The new acquisitions largely add to the partnership’s wind and solar assets. In the meantime, its units trade at a moderate level to future cash flow and the distribution yields a high 6.3%.
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BROOKFIELD RENEWABLE PARTNERS L.P. (Toronto symbol BEP.UN; www.brookfieldrenewable.com) has interests in 217 hydroelectric generating stations, 76 wind farms and 48 solar power facilities. In all, it operates over 16,000 megawatts of generating capacity.
Currently, 82% of Brookfield’s power generation comes from its hydroelectric operations, 16% from wind, and 2% from solar. Overall, 60% of its power generation is in North America, 20% in Brazil, 15% in Colombia, and 5% in Europe and Asia.
In the quarter ended March 31, 2018, cash flow per unit rose 12.7%, to $0.62 U.S. from $0.45 a year earlier. The gains came from new plants as well as stronger power generation at all of Brookfield’s plants.
While the hydroelectric segment generated the bulk of the gains, as expected, cash flow from wind power was up $7 million from a year earlier thanks largely to the contributions of the TerraForm acquisition (see below).
In the final quarter of 2017, Brookfield completed its deal with U.S.-based solar and wind power operator TerraForm Power. It purchased 51% of TerraForm Power and 100% of TerraForm Global, which owns and operates clean energy plants in emerging markets.
Value Stocks: Spanish wind and solar firm to come through TerraForm deal
The two TerraForm acquisitions added 3,600 megawatts of solar and wind assets to Brookfield’s renewable power portfolio. The partnership is now integrating TerraForm Global into its Brazilian operations.
Through TerraForm Power, the partnership will now pay $1.2 billion for 100% of Saeta Yield. Based in Madrid, Spain, it has a 1,028-megawatt portfolio of wind and solar assets.
In October 2017 the partnership also completed two acquisitions in Europe for $278 million. One was its purchase of a 25% stake in First Hydro, an operator of three pumped storage facilities in Wales with a capacity of 2,100 megawatts. The other was the purchase of a small wind farm in Northern Ireland.
Brookfield’s units now trade at a very reasonable 17.7 times its forecast 2018 cash flow of $2.26 U.S. a share. The partnership raised its dividend by 4.8% with the March 2018 payment, to $0.49 U.S. from $0.4675. The units now yield a high 6.3%.
Recommendation in Canadian Wealth Advisor: Brookfield Renewable is a buy.
I’d like to keep some articles, like this one, in a file for future reference and possible investing. Is there a place on your site where we can keep on file specific advice for future use?
Thank you for looking into this matter.
Pierre Dallaire
Thanks, Pierre. In answer to your question–no quite. But your web browser lets you add specific pages, or posts of ours, to your library of “Favourite” webpages. Our customer service team is happy to help you with that, should you need it. Please ring our 1-800 number.
I would feel more comfortable with this recommendation if it included some kind of proforma statement demonstrating that eventually the company will make a profit. As it is, the company is losing money and forecasts for 2019 show that expected profit is far exceeded by the dividend being paid. When will the company become profitable, and the dividend convincingly sustainable?
Thanks for your question, Ronald. We have provided all the proforma results that the company has made public. We will continue to provide updates on this company, its stock and its niche market.
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What is the payout ratio for BEP.UN? Can the dividend continue to grow in the years ahead?
Thanks for your question. We’ll take a look at the issues you raised in an upcoming issue of our Canadian Wealth Advisor newsletter.
I’d like to keep some articles, like this one, in a file for future reference and possible investing. Is there a place on your site where we can keep on file specific advice for future use?
Thank you for looking into this matter.
Pierre Dallaire
Thanks, Pierre. In answer to your question–no quite. But your web browser lets you add specific pages, or posts of ours, to your library of “Favourite” webpages. Our customer service team is happy to help you with that, should you need it. Please ring our 1-800 number.
I would feel more comfortable with this recommendation if it included some kind of proforma statement demonstrating that eventually the company will make a profit. As it is, the company is losing money and forecasts for 2019 show that expected profit is far exceeded by the dividend being paid. When will the company become profitable, and the dividend convincingly sustainable?
Thanks for your question, Ronald. We have provided all the proforma results that the company has made public. We will continue to provide updates on this company, its stock and its niche market.