Brookfield Renewable - Sustainable Profits

For nearly eight years as a Conservative Holding in our model portfolio, Brookfield Renewable Partners L.P. (Toronto: BEP-U) (BEP) has reliably built cash flow from a growing global portfolio of contracted hydro, wind and solar assets.

Dividends have increased nearly 60 percent since my initial recommendation and face few hurdles to 5 to 8 percent annual growth.

For the first six years or so, our returns were steady in the neighborhood of 10 percent a year. Then came trillions of ESG (environment, social, governance) dollars. And Brookfield partnership units and C-Corp shares spun off last July have been off to the races, reaching profit taking levels earlier this year.

Since then, partnership units and Brookfield Renewable Partners C-Corp (BEPC) have been caught up in the selling of renewable energy stocks. Now they’re ripe for purchase by conservative investors.

Unlike the vast majority of companies passing for “green” these days, Brookfield has a sustainable business model that supports robust capital spending for growth, a strong balance sheet and reliable dividend increases.

The key takeaway is added wind and solar capacity over the past year lifted underlying generation by 13.2 percent, and that in turn increased normalized funds from operations by 21.2 percent.

Brookfield’s primary customers are governments, regulated utilities and large corporations. That means very little risk of default, which indeed proved the case during the pandemic stress test. As for growth, Q1 results clearly demonstrate continuing ability to access capital on reasonable terms and opportunities to invest.

In a momentum driven market like this, stock prices frequently rise and fall well above and below reasonable entry points. But patient investors will find much to like buying and locking away either Brookfield Partnership units or the C-Corp shares.

Both represent the same ownership and pay the same dividend. The difference is BEPC does not require filing a K-1 and lacks the tax advantages of the BEP units. Invest to your preference.

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Alexa Graham 3 years ago Member's comment

What profits? 4 quarters of losses!