I have a few energy resources in my portfolio. It’s my favorite Brookfield Renewable (NYSE: BEP)(NYSE: BEPC). It has done a great job over the years of creating value for shareholders like me, steadily increasing the cash flow per share or dividend.
But no matter how good the investment was in the past, I think Brookfield could be even better in the future. Here’s why.
World leader in renewable energy megatrend
Brookfield built one of the largest renewable energy platforms around the world over the years. The company has steadily expanded by acquiring and developing high quality, cash-flowable renewable energy assets.
This strategy has paid great dividends for its investors. Brookfield has grown Operating Means (FFO) per share at an annual interest rate of more than 10% over the last decade. This contributed to a 6% annual dividend increase from 2012, bringing the yield to 2.9%. Since its inception, Brookfield Renewable has generated 20% of total annual revenue.
This gives the company a solid foundation to continue to create shareholder value as the future carbonation megatrend begins to accelerate in the coming years. Brookfield specializes in each major category, including hydropower, wind (marine-terrestrial), solar (utility-distributed generation), energy storage, green hydrogen ման energy transmission assets. As a result, it can capture opportunities across the spectrum, giving it a chance to become the selection of companies and institutions that seek to reduce their gas activities.
Brookfield believes that over the next few years, it could provide a strong increase in FFO shares per share as global decarbonisation efforts accelerate. The Company’s current assets could provide FFO growth of 3% to 6% per share by 2025. His prospects may be the escalators of inflation in existing contracts, the ability to secure higher rates at the end of existing contracts.
In addition, Brookfield has an extensive development pipeline. The second quarter ended with 31 gigawatts (GW) of its global development pipeline. To make its accumulated volume promising, it has spent decades building its current operating portfolio of 21 GW. The company estimates that it can invest $ 250 million to $ 350 million annually in its development pipeline, leading to a 3% to 5% increase in FFO’s annual stake. Brookfield can finance these investments with unallocated cash after paying for its distribution and leveraging its high-level balance sheet.
Add to that և the company can grow its business organically from 6% per year to 11% by 2025. It easily supports its highly profitable plan to increase its dividends from 5% to 9% per annum.
However, this is only the tip of the iceberg. Brookfield believes that it can continue with highly aggressive mergers and acquisitions (M & As). It can invest up to $ 1.5 billion a year in M&A, which could increase the FFO of up to 9% per share per year. It has already invested $ 500 million in a number of deals in 2021, putting it to a good M&A failure this year. The company is financing this increase through a capital recycling program to sell low-yielding assets using cash for better returns.
Overall, Brookfield could provide up to 20% annual FFO stock growth over the next few years. This will allow the company to increase its profit margin near the highest point of its target range, improving its pay-as-you-go ratio, making it even stronger financially. This combination of growth: income should provide above-average incomes.
One of the best companies in this megatrend
Brookfield Infrastructure is the world leader in one of the biggest megatrends of our lives. It has a great experience in creating shareholder value by consistently building one of the industry’s highest quality businesses. That is why it is in an ideal condition to continue the growing value for investors in the coming years.
This high probability of generating comprehensive revenue is why Brookfield Renewable is my favorite energy resource.
This article presents the opinion of a writer who may disagree with the position of the “official” offer of Motley Fool Premium Consulting. We are motley! Investigating an investment thesis, even our own, helps all of us think critically about investing, making decisions that will help us become smarter, happier, and richer.