Is now the time to buy shares of a high-yield energy company with shares down almost 15%?

Brookfield Renewables (BEPC -0.18%) (BEPs) It is currently about 15% below its 52-week high. This crisis has pushed renewable energy producer dividend yield up over 5%. This is several times more than S&P500‘S the current dividend yield is less than 1.5%.

AND high dividend yield is not the only attraction of Brookfield Renewable. Leading global Renewable energy The manufacturer is growing rapidly. Add to that its lower valuation, and the company could generate supercharged total returns in the coming years. That makes now a great time to buy shares.

Lucrative passive income stream

Brookfield Renewable has been a great income-generating investment for years. The renewable energy company has paid out money to its investors since 2001, increasing its payout at a rate of 6% per year in this period of time. It was his 13th. simple year, increasing your payout by at least 5%.

The company backs its lucrative and growing payouts with sustainable cash flow. It sells about 90% of the power generated by its diversified global portfolio of renewable energy assets under long-term contracts with utilities and large corporate buyers. Most of the contracts link power rates to inflation, which accounts for 70% of its revenues. These contracts provide Brookfield with sustainable cash flow. Inflation alone should boost its funds from operating activities (FFO) by 2% to 3% annually.

Brookfield complements its stable cash flow profile with a strong balance sheet. The bank has a solid investment-grade credit rating and uses mainly long-term fixed-rate debt. The company also has high financial liquidity, which amounted to USD 4.4 billion at the end of the second quarter and is regularly replenished. recycling capitalIt expects to generate approximately $1.3 billion from asset sales this year, which will help fund new investments and maintain financial flexibility.

Powerful growth factors

While Brookfield’s lucrative distribution is a big draw, it’s only part of the investment thesis. The company delivers strong earnings growth. Its FFO per share has grown at a rate of 12% per year since 2016. It is expected to continue to grow Its profits will remain in double digits until at least 2028.

In addition to inflation-driven interest rate hikes, Brookfield expects its margin-enhancing efforts—such as providing ancillary services to existing customers and securing higher rates on uncontracted capacity—will add another 2% to 4% to its FFO per share each year. The company also has a massive growth pipeline. This Currently is expecting This year, it will complete development projects with a total capacity of 7 gigawatts and intends to scale up its operations to bring on average 10 GW per year over the next few years. Growth projects should increase FFO by another 3–5% per share each year.

Finally, Brookfield expects its capital recycling strategy to enable it to continue to pursue accretive M&A activity, which will boost FFO per share growth. down this double digits. The company has secured three new deals this year. Brookfield and its partners are buying a European renewable energy producer Newlyweds in a two-stage transaction, an investment of $540 million. The company also acquired Leap Green, a leading wind-focused company in India, an investment of $40 million; and made its first investment in South Korea, in Hanmaeum Energy for $100 million.

Brookfield Renewable’s rapidly growing earnings should support further dividend growth, with the company targeting a 5% to 9% annual increase in payout.

Powerful Total Return Potential

Brookfield Renewable Offers Investors Solid Income Stream With Sell-Off Currently yielding over 5%. That provides investors with a solid underlying return. In addition, it expects FFO per share to grow by over 10% per year and dividends by 5% to 9% per year. All told, Brookfield should be able to generate average annual total returns in the mid-teens. That’s a high return for a higher-yielding dividend stock. This combination of income, growth and value makes Brookfield look like Very stocks worth buying now.