NextEra Vs. Brookfield: Which Renewable Energy Stock Is A Better Buy?

The bull case for Brookfield Renewables

Canada-based Brookfield Renewables owns and operates a diverse portfolio of power generating facilities that represent approximately  20 GWs of power generating capacity. BEP stock was down on April 19 after the company revealed it sold 400 MWs of wind-power assets to NextEra Energy. This represents approximately  8% of Brookfield’s total wind-power generating capacity. Last week, Brookfield also agreed to sell its onshore wind operations in the U.K. and Ireland to Denmark-based Orsted.

The two deals will allow Brookfield to generate some$1.3 billion and boost its liquidity position. These transactions are part of the company’s capital recycling program in which it sells mature assets and uses the proceeds to fund projects that deliver a higher return.

Brookfield intends to invest approximately  $1 billion each year in acquisitions and other development projects. These projects will be financed by asset sales, like the aforementioned sales. Brookfield is optimistic about increasing its cash flow per share by 10% annually through 2025 despite these asset sales. The improvement in cash flows will also support dividend increases in the future. BEP stock has a forward yield of 4.9% and the company aims to increase payouts between 5% and 9% annually.

The verdict

The shift to green energy solutions at the global level will be the key driver of revenue and earnings growth for NextEra and Brookfield. The two companies continue to build robust portfolios of cash-generating assets that will support future dividend increases.

It’s difficult to choose between the two renewable energy heavyweights. Brookfield Renewables is valued at a market cap of $11 billion, which is 14x lower than NextEra’s market cap of more than  $150 billion. It’s possible that Brookfield will be able to grow faster than NextEra and generate outsized returns. However, BEP’s smaller size also makes it a riskier bet.

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