The Company in a Nutshell
- BEP is a company with over 100 years of experience in paying a good dividend yield.
- Management aims for a 5-9% annual distribution increase.
- The company benefits from the renewable energy tailwind.
Date Reviewed | 8/16/2024 |
Company Name | Brookfield Renewable Corp |
Symbol | BEPC |
Sector | Utilities |
Industry | Utilities - Renewable |
Beta | 1.139 |
PRO Rating | 4 |
Dividend Safety | 4 |
Business Model
Brookfield Renewable Corp. operates renewable power platforms and sustainable solutions. The Company’s portfolio consists of hydroelectric, wind, solar and storage facilities in North America, South America, Europe and Asia. It has approximately 33,000 megawatts of installed capacity and a development pipeline with approximately 155,400 megawatts. The Company’s businesses include Renewable Power & Transition, Infrastructure, Private Equity, Real Estate, Credit and Insurance Solutions. Its Renewable Power & Transition business operates across five continents, managing a diverse portfolio of hydro, wind, solar, distributed energy and sustainable solutions. Its Infrastructure business owns and operates assets across the transport, data, utilities and midstream sectors. Its Private Equity business sectors include business services, infrastructure services and industrials. Its Real Estate business sectors include housing, logistics, hospitality, science and innovation, office, and retail.
Current price | 30.15 |
ROE | -3.10 % |
ROIC | 3.45 % |
Shareholder Yield | 2.90 % |
5-Yr Total Return | 24.45 % |
1-Yr Total Return | 14.90 % |
Next Earnings Date | 11-01-24 |
Latest Quarter Information
08-02-2024, Brookfield Renewable reported a good quarter (revenue +22%, FFO per share +6%), but it wasn’t enough to get love from the market. The company reported an FFO of $339M (+9%), and management confirmed it’s on track to achieve its goal of generating FFO growth of 10%+ per year. The hydroelectric segment delivered FFO of $136M, benefiting from strong all-in pricing, particularly in North America, and solid generation in Brazil. The wind and solar segments generated a combined $194M of FFO, driven by recent additions in North America, Europe and India. The distributed energy, storage, and sustainable solutions segments generated a combined $86M of FFO in the quarter.
What the CEO said:
“We had another strong quarter, building on our momentum to start to the year with operating results and growth initiatives that position us to deliver our target 10%+ FFO per unit growth target for 2024. We were successful deploying significant capital into opportunities that further enhance the market-leading reach and scale of our business. Our investments focused on adding leading platforms in attractive markets with scale operating businesses and development pipelines that complement our current operations and further diversify our cash flows,”
What we say:08-02-2024, Brookfield Renewable reported a good quarter (revenue +22%, FFO per share +6%), but it wasn't enough to get love from the market. The company reported an FFO of $339M (+9%), and management confirmed it's on track to achieve its goal of generating FFO growth of 10%+ per year. The hydroelectric segment delivered FFO of $136M, benefiting from strong all-in pricing, particularly in North America, and solid generation in Brazil. The wind and solar segments generated a combined $194M of FFO, driven by recent additions in North America, Europe and India. The distributed energy, storage, and sustainable solutions segments generated a combined $86M of FFO in the quarter.
Investment Thesis
The future of energy will be found across hydroelectric, solar, and wind power. Approximately 50% of BEP’s portfolio is focused on hydroelectric power. New money is going toward solar and wind projects. The company has power plants across North America (63% of cash flow), South America (19%), Europe (16%), and Asia (2%). BEP enjoys large scale capital resources and has the expertise to manage its projects across the world. Management aims for a 5-9% annual distribution increase. This promise is backed by double-digit guidance that includes a mix of organic and M&A growth. Investors are gravitating toward clean energy and BEP is well-positioned to attract them. BEP now offers shares under both a trust and a regular corporate structure. So far, the C class (BEPC) tends to attract more investors, meaning a stronger price. Following an impressive stock price surge through 2020, the stock is trending down for the past 2 years. While the stock is cooling down, there is nothing to worry about. The rise of interest rates on bonds combined with the incredible ride BEP has had is responsible for this correction. In late 2023, management reaffirmed its strong position and ability to generate strong returns over the long haul. The latest results in early 2024 confirmed that BEP is still focused on growth opportunities.
In Q2 of 2024, management also highlighted the important contract signed with Microsoft to supply 10.5GW to support MSFT’s AI and cloud business energy needs. This could open the doors to more deals with corporations in the future.
Dividend Triangle
5-Yr Rev. Growth | 5.90 % |
5-Yr EPS Growth | 0.00 % |
5-Yr Div Growth | 0.00 % |
Potential Risks
This kind of company grows mostly through leverage, so debt is an issue. BEP has closed to $30B USD in long-term debt. This will become quite a burden, even if management is experienced. The market’s appetite for additional debt may be limited in the future. BEP deals with large numbers as it participates in capital-intensive industries. One mistake and the dividend growth policy may be in danger. In our previous review, we warned of potential profit taking after such a large stock price surge. This is exactly what happened in 2021. Now that the stock price has moved, BEP seems to exhibit a bit more of an interesting entry point. Please note that an investor should not follow EPS, but rather FFO per share, which is disclosed in the quarterly earnings updates. There is an important difference between investors’ time horizons and Brookfield. Brookfield invests for decades with patient capital while investors tend to be hungry for short-term news. This distortion often translates into short-term fluctuations and the stock price drop.
Debt/Equity | 2.85 |
Financial Debt to EBITDA (TTM) | 5.05 |
Current Ratio (Quarterly) | 0.40 |
Credit Score | 2 |
Dividend Growth Perspective
BEP boasts a strong dividend profile. The dividend decreased in 2020 because of the stock split. There was no real dividend cut. The company maintains significant liquidity for future projects. Management was smart to benefit from a strong market to raise additional funding. The FFO payout ratio for the full year of 2023 was 81 using a dividend of $0.3375/share. Please always review BEP’s latest quarterly earnings for the exact FFO payout ratio. Shareholders can expect mid-single-digit dividend growth rates going forward. Brookfield announced a 5.5% increase in early 2023 and a 5% in early 2024. The dividend is now at $0.355/share for a payout ratio of 85% based on 2023 numbers. (Keep in mind that your dividend will be paid in USD).
Dividend ($) | 1.42 |
Dividend Yield Fwd | 4.70 % |
Dividend Frequency | Quarterly |
Average 5-Yr Yield | 3.65 % |
Payout Ratio (%) | 0.00 |
Cash Payout Ratio (%) | 0.00 |
DGR 1-Yr | 5.20 |
DGR 3-Yr | 32.65 |
DGR 5-Yr | 0.00 |
DGR Streak | |
Chowder Score | 0.00 |
Next DVD PMT | 09-27-24 |
Valuation
Recent Annual Dividend Payment | $ 1.34 |
Expected Dividend Growth Rate Years 1-10 | 6.00% |
Expected Terminal Dividend Growth Rate | 5.00% |
Discount Rate | 10.00% |
Discount Rate (Horizontal) | |||
Margin of Safety | 9.00% | 10.00% | 11.00% |
20% Premium | $ 45.77 | $ 36.51 | $ 30.34 |
10% Premium | $ 41.95 | $ 33.46 | $ 27.81 |
Intrinsic Value | $ 38.14 | $ 30.42 | $ 25.28 |
10% Discount | $ 34.33 | $ 27.38 | $ 22.75 |
20% Discount | $ 30.51 | $ 24.34 | $ 20.22 |
Market Cap | 5 B |
PE Ratio | 14.35 |
Fwd PE | 95.95 |
Price to Book Ratio | 2.05 |
DDM Valuation | 30.47 |
Average 5-Yr PE | 18.49 |
Value Score | 59 |
- All financial metrics are updated weekly.
- The DSR PRO rating and Dividend Safety Score are updated quarterly.
- The analysis (investment thesis, risk potential, dividend growth perspective and DDM calculation) is reviewed every 6 months.
- The PDF format includes only comments (no metrics) and is reviewed every 6 months.