1 Renewable Energy Share to Buy and Hold

Written by Christopher Liew, CFA at The Motley Fool Canada

People invest in stocks for the growth of their money, if not for financial well-being. However, those looking to grow their money or maximize returns will stay invested longer. If your goal is the same, TSX renewable energy stocks are suitable for long-term investors.

The renewable energy sector offers huge opportunities and, although still less profitable, should accelerate quickly. As more and more governments switch from fossil fuels to green energy, expect the global renewable energy market to grow tremendously.

More importantly, renewable resources are abundant and have an infinite lifespan. And for potential investors, you are investing money for the good of the planet.

Choice at the beginning

Brookfield Renewable Partners (TSX:BEP.UN) is quickly becoming the number one choice in the renewable energy sector. The renewable energy company’s $7.3 billion portfolio of assets includes all renewable energy sources (hydroelectric, wind and solar). In addition to renewable energy, the platform offers decarbonization solutions.

Management is implementing a recurring growth strategy and leverages Brookfield Renewable’s diversified portfolio to generate high-quality cash flow. The goal is to achieve 12% to 15% total returns and 5% to 9% annual distribution growth. Assume you are investing today, BEP.UN is trading at $35.92 per share (+6.2% year to date) and is paying a 5.6% dividend.

Given the stock price, yield, and quarterly payout frequency, an investment of $7,184 (200 shares) would yield $100.04 in passive income every three months.

A record year

Brookfield Renewable is poised to become a global clean energy supermajor. Its CEO, Connor Teskey, said it had a record 2023 despite a rising rate environment and supply chain challenges. For the 12 months ended Dec. 31, 2023, its net loss of $100 million was 66.1% lower than in 2022, while funds from operations (FFO) rose 9% year over year to a record $1.1 billion.

The story continues

Q4 2023 net income was $35 million compared to a net loss of $82 million in Q4 2022. Operating and development capacity was 166,000 MW at year-end 2023. Brookfield has invested (or agreed to invest) $9 billion of capital for accretive investments in its key markets.

The project pipeline (a record 3,400 MW) contributed $50 million in FFO over the past 12 months. Teskey added that the favorable results were driven by a diversified asset base, high-quality inflation-linked and contracted cash flows, organic growth and a contribution from acquisitions.

Brookfield Renewable has allocated a portion of its capital to share repurchases and increased its dividend by 5%. Management hopes to generate superior risk-adjusted returns to continue to create significant value for investors.

Latest financial results

In the first quarter of 2024, revenue increased 12.1% year over year to $1.5 billion. Net loss exceeded $70 million compared to $177 million in net income due to higher interest and depreciation expenses resulting from growth in business and a weakening U.S. dollar compared to 2023.

Still, Teskey told unitholders that Brookfield Renewable had a strong start to the year. At the end of the quarter, the company had $4.4 billion in available liquidity that it could use to grow its business.

Ready for the growing demand for clean energy

Brookfield Renewable maintains a positive outlook and is poised to meet the growing demand for clean energy. The company expects to further strengthen its renewable energy assets as interest rates stabilize soon. Management believes the chances of achieving 12% to 15% long-term total returns are high.

The article 1 Renewable Energy Stock to Buy and Hold first appeared on The Motley Fool Canada.

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Fool contributor Christopher Liew has no position in any stocks mentioned. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

2024