Brookfield Renewable (BEPC -0.63%) (BEP -0.31%) isn't your average high-yielding dividend stock. The leading global renewable energy producer also has powerful growth potential. The company has a quartet of catalysts that could drive double-digit annual earnings-per-share growth for years to come.
Despite that robust growth profile, Brookfield isn't taking its foot off the gas. The company and its partners recently agreed to buy National Grid's (NGG 5.52%) onshore renewable energy business. That deal will give it even more power to continue increasing its 5%-yielding dividend.
NYSE: BEPC
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Continuing to buy and build a leading U.S. onshore portfolio
National Grid has agreed to sell its National Grid Renewables U.S. business to Brookfield Asset Management and its institutional partners, which include its renewable energy subsidiary, Brookfield Renewable. It's selling its U.S. onshore renewable energy platform for over $1.7 billion. That platform develops, constructs, owns, and operates utility-scale solar, onshore wind, and battery storage assets across the United States. National Grid Renewables U.S. currently has 1.8 gigawatts (GW) of operating capacity and another 1.3 GW under construction.
The sale is another step in National Grid's plan to focus on networks and streamline its business. The company has also been looking for a buyer for its Grain liquefied natural gas terminal in Britain as it sells assets to recycle capital back into growing its core businesses.
NYSE: NGG
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Meanwhile, the acquisition will further enhance Brookfield's leading U.S. onshore renewable energy platform. The company has made several acquisitions over the past few years, including buying Duke Energy's commercial U.S. renewable energy business for $2.8 billion in 2023. That business included 5.9 GW of operating and under construction assets and a 6.1 GW development pipeline.
Brookfield Renewable also agreed to invest up to $2 billion into Scout Clean Energy and Standard Solar in 2022 to scale its U.S. onshore renewable energy operating capacity and development capabilities. Scout added 1.2 GW of operating wind assets and a 22 GW pipeline of wind, solar, and storage projects, while Standard Solar had 2 GW of operating and under construction assets and nearly 2 GW of additional solar projects under development.
Adding more power to its growth profile
Brookfield Renewable already has highly visible and secured growth through 2029. For example, inflation escalations across its existing power purchase agreements (PPAs) are expected add 2% to 3% to its funds from operations (FFO) per share each year. Meanwhile, margin enhancement activities like securing higher market power prices as legacy PPAs expire should add another 2% to 4% to its FFO per share each year.
On top of that, Brookfield has a massive backlog of development projects around the world. It ended last year with a staggering 200 GW of projects under development, including 65 GW in its advanced-stage pipeline. The company is ramping up its development capabilities, aiming to grow its annual commissioning pace from 7 GW last year to 10 GW per year in the near term. These development projects should add another 4% to 6% to its FFO per share each year.
Meanwhile, M&A activities like the National Grid deal will further enhance its growth rate. These acquisitions provide incremental income from the operating assets' cash flows while enhancing its already vast development project backlog. Brookfield believes its ability to continue making accretive acquisitions will help push its FFO per-share growth rate above 10% annually for the foreseeable future. That easily supports the company's plan to continue increasing its high-yielding dividend at a 5% to 9% annual rate.
Powerful total return potential
Brookfield Renewable expects to grow its FFO at a more than 10% annual rate for years to come. Deals like the acquisition of National Grid's U.S. renewable energy platform will further enhance its ability to achieve that goal because it will add incremental cash flow in the near term via its operating assets while expanding its growth profile through its development pipeline. Because of that, it should have plenty of power to continue growing its 5%-yielding dividend. Add that income to its growth rate, and Brookfield Renewable could produce powerful total returns in the coming years, making it a great stock to buy and hold for the long haul.
