Want to buy high-yield Brookfield Renewable stock? Your ticker choice matters. Here’s why.

Brookfield Renewables (BEP 2.30%) (BEPC 1.24%) does exactly what you might expect from its name: invests in renewable energy assets. From that perspective, it’s easy to understand. But things get more complicated. Here’s what you need to know about this fairly complex entity before you buy it.

What is Brookfield Renewable?

From a broader perspective, Brookfield Renewable is a way to Brookfield Asset Management (BOOM 1.91%) to raise capital. Brookfield Asset Management is a large Canadian asset manager with a long history of investing in infrastructure assets on a global scale. It manages the day-to-day operations of Brookfield Renewable. Brookfield Renewable often invests alongside Brookfield Asset Management, taking a percentage of Brookfield Asset Management’s private investments in clean energy projects.

So, if Brookfield Asset Management buys a solar farm, it can allocate a percentage of that investment (say, 25%) to Brookfield Renewable. Why would it do that? Because it means Brookfield Asset Management doesn’t have to spend as much of its own money. Brookfield Renewable, as a standalone entity, has capital that it has raised from selling stock to investors that it can use.

From an investor’s perspective, Brookfield Renewable is a way to invest alongside Brookfield Asset Management. Because Brookfield Asset Management only works with large investors, Brookfield Renewable is a way for the “little guy” to play with the big boys.

It’s kind of a win-win situation in a lot of ways. But it gets complicated because there are two different ways to own Brookfield Renewable — the partnership class and the corporate common stock class.

Brookfield Renewable meets demand

Initially, Brookfield Renewable Partners was the only way to buy Brookfield Renewable. However, partnerships come with some tax complications, such as a K-1 form that investors must file on April 15 of each year. However, unlike most master limited partnerships, Brookfield Renewable Partners does not generate unrelated business taxable income (UBTI).

It’s a pretty complex topic, but UBTI makes owning an MLP in a tax-advantaged retirement account a lot more complicated. That and the K-1 form are why many investors shy away from any kind of publicly traded partnership.

Some large investors, such as pension funds and insurance companies, also shy away from partnerships, but that’s usually because of portfolio mandate constraints. As Brookfield Renewable grew, Brookfield Asset Management wanted to attract more capital. A quick and easy way to do that was to simply create a second way to own the same company, this time in a traditional corporate structure.

That’s why investors can now own Brookfield Renewable Corporation. It’s the exact same entity, but without the complexity of a partnership structure.

Here’s an interesting thing: even though they’re essentially identical, Brookfield Renewable Partners yields 5.7%, while Brookfield Renewable Corporation has a dividend yield of 5%. Why the difference? The dividends are the same—it’s the demand for each investment that’s different. More investors want to own Brookfield Renewable Corporation than Brookfield Renewable Partners.

This makes sense considering that large investors like pension funds can only buy the corporate version, but it opens up opportunities for experienced investors who are willing to deal with a bit more paperwork at tax time.

What should investors do about Brookfield Renewable?

The short answer is that most income investors will probably be better off with Brookfield Renewable Partners, which can even be conveniently held in a tax-advantaged retirement account. Yes, you’ll have to deal with a K-1 form, but it won’t be as complicated as the forms you’d get from an LLC.

If you still don’t want to deal with partnerships, Brookfield Renewable Corporation is a good fallback option. Just understand that you’re paying a significant premium for the convenience of avoiding a K-1.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield Asset Management and Brookfield Renewable. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.