Positions I’m Watching: Brookfield Renewable Partners (BEP)

Positions I’m Watching: Brookfield Renewable Partners (BEP)

By: Stacey Nickens

Utilities companies have historically offered the possibility of lower risk and steadier reward, and Brookfield Renewable Partners (BEP) is no different. The renewable power generator owns both hydroelectric and wind facilities across North America, Latin America, and Europe. They are an attractive investment for a variety of reasons, ranging from their weather-resistant business model to their dividend yield.

BEP operates by buying or developing high-quality renewable power generators at a discounted price. They improve and grow these generators before selling them for a gain. BEP can then recycle the earned funds back into a new opportunity. BEP’s healthy business model has proven results, even during the pandemic. In July, Seeking Alpha reported that BEP’s funds from operations grew by 5% year over year. Given that people always use electricity, regardless of the political or economic climate, BEP benefits from the underlying safety of the utilities sector. More than that, because BEP specializes in renewable energy, they have long-term growth potential and could face fewer regulatory or technological disruptions than a traditional energy generator.

BEP is also a diversified holding, with their own assets spread across a variety of continents. Diversification offers another layer of protection from volatility, especially given that most of their revenue generation occurs in stable, developed economies. This diversification stability is complimented by an current trailing dividend yield of 4.2% and a 5-year average dividend yield of 5.8%. Seeking Alpha projects that the company could grow around 5% annually, and between this projected growth and their dividend yield, BEP could be an attractive add for retirees following the 4% annual withdrawal rule. (This rule states that retirees should avoid withdrawing more than 4% of their portfolio’s value each year in order to give the portfolio time to recover and grow.)

Finally, Morningstar currently lists BEP as undervalued at a 12% discount. Morningstar’s fair value sits at $54.89, while BEP stock is currently trading around $48. This discount could make BEP a good buy for the present moment.

Interested in other investment opportunities? Review this analysis of the gaming company Zynga.

Sources: Morningstar, Seeking Alpha
Disclosures: Past performance is not a guarantee or a reliable indicator of future performance. All securities carry a unique set of risks subject to a variety of factors. There is no guarantee that these investment strategies will work under all market conditions or that they are are suitable for all investors. This material has been distributed solely for informational purposes and should not be considered as individual investment advice or recommendation. Individuals should consult their investment professional prior to making an investment decision.
By Categories: BlogPublished On: September 28th, 2020