This 4.5% dividend stock continues to add power to its growth engine

Brookfield Renewable (NYSE: BEPC)(NYSE:BEP) it’s already growing fast. The world’s leading renewable energy company has enough organic growth to grow its funds from operations (FFO) per share by 7-12% annually through 2028. However, it doesn’t end Business from striving acquisition opportunities to accelerate growth.

The company is working on adding even increase the power of its growth engine by investing in European markets renewable energy producer Neoen. Below, we take a closer look at the potential transaction and how it could accelerate Brookfield’s growth in the coming years.

Two-stage contract

Brookfield Renewable works with its parent company, Brookfield Asset Managementand other institutional investors, including Singapore’s Temasek, to purchase a majority stake in Neoen, a leading global producer of renewable energy based in France. The group would buy a majority of the shares from Neoen’s core investors and then purchase the remaining shares of the company at the same price from minority shareholders.

The deal would value Neoen at approximately $6.6 billion. Brookfield Renewable will invest approximately $500 million in this transaction through its Brookfield Global Transition Fund II, where it is the largest investor.

Neoen is a leading global producer of renewable energy. It has operating wind, solar and storage assets with a capacity of 8 gigawatts (GW). under construction. It also plans projects with a capacity of 20 GW at advanced stages of development in Australia, France and the Nordic countries.

Neoen has significant expertise in battery storage. Such a large platform would expand Brookfield’s global operations, which currently boasts nearly 34 GW of generating capacity and approximately 157 GW of projects under development.

Brookfield’s investment in Neoen would help accelerate its ability to grow its pipeline of projects. Brookfield can provide Neoen with access to capital and expertise. The world will need more renewable energy in the coming years, especially considering increasing demand from data centers to support cloud applications and artificial intelligence (AI).. Brookfield recently signed a contract a breakthrough energy contract with a technology titan Microsoft to help realize its artificial intelligence ambitions.

Adding to already powerful growth plan

Brookfield’s proposed acquisition of Neoen will add to this situation Already solid growth profile. The company’s current renewable energy business is expected to add 4-7% growth FFO per share growth annually through 2028. It expects increases in inflation-linked interest rates under long-term power purchase agreements and margin-enhancing activities such as the provision of ancillary services to drive this growth.

The story continues

Brookfield also expects its growth plan to increase FFO by 3% to 5% per share each year. The company expects that over 7 GW of new capacity will be put into operation every year end of the decade. The acquisition of Neoen would enhance its ability to achieve this goal by increasing its large-scale development plans.

Meanwhile, Brookfield sees acquisitions such as Neoen complementing its own Already powerful organic growth factors. The company believes that mergers and acquisitions will enable it to deliver annual FFO per share growth of more than 10% at least through 2028. Neoen is the latest in a series of transactions for the company aimed at consolidating the global renewable energy industry with the goal of becoming even greater-scale player. The company’s growing scale helps reduce costs and opens the door to new opportunities, such as partnerships with Microsoft.

Brookfield’s quartet of growth drivers should fuel continued growth in its high-yield dividend (currently around 4.5%). The company’s goal is to increase this payout by 5% to 9% annually. Since 2001, it has increased its dividend at a compound annual rate of 6%.

Powerful total return potential

Brookfield Renewable wants to expand its resources Already strong growth profile through the investment in Neoen. The deal would increase that amount scale in Europe and add to your development pipeline. It would also give the company fuel for double-digit growth over the next few years, increasing its ability to continue to grow its high-yielding dividend.

This would further enhance the company’s ability to achieve double-digit total returns in the coming years. Brookfield’s earnings and growth potential make it one of the top renewable energy companies to buy.

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Matt DiLallo holds positions at Brookfield Asset Management, Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool holds positions in and recommends Brookfield Asset Management and Brookfield Renewable. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

The 4.5% dividend stock continues to add power to its growth engine. It was originally published on The Motley Fool