Jhe energy sector has not always treated dividend investors well. Volatile oil and gas prices have made it difficult for many energy stocks to maintain their dividends over the years. Meanwhile, with the global economy shifting fuel sources to cleaner alternatives, it’s unclear whether many energy companies will be able to continue paying dividends in the decades to come.
However, one energy stock that should have no problem providing sustainable income to its investors is Brookfield Power (NYSE: BEPC) (NYSE:BEP). The company has a long history of paying a growing dividend, which is expected to continue in the years to come, given its leadership in renewable energy.
Sustainable revenue growth
Brookfield Renewable has delighted dividend investors over the years. The world’s largest producer of renewable energy recorded its 11th consecutive year of dividend growth of at least 5% at the start of 2022. Overall, Brookfield’s dividend has posted an average compound annual growth of 6% throughout. throughout its history.
Brookfield has been able to steadily increase its payout as it has consistently increased its funds from operations (FFO) per share. Several factors have helped fuel its growth, including rising electricity prices, falling costs as it increases in scale, development projects and acquisitions. Brookfield also benefits from contractually guaranteed recurring cash flows from its renewable power assets and a strong financial profile. These factors give it the financial flexibility to continue to develop its renewable energy portfolio and its dividend.
Decades of growth still to come
Brookfield has benefited from the growing demand for renewable energy over the years. This will only get stronger in the future. The company estimates that the global economy will need to invest $150 trillion to decarbonize over the next 30 years. This should provide Brookfield with countless investment opportunities to fuel its dividend going forward.
Currently, the company has 69 gigawatts (GW) of clean energy projects in its development pipeline. That’s enough to power over 9 million homes for a year. This is more than triple its current operational capacity of 21 GW.
These development projects, combined with the integrated growth of its legacy assets as a result of higher power prices and lower costs, are expected to support FFO per share annual growth of 6% to 11% through 2026 at least. Meanwhile, Brookfield expects the acquisitions to deliver up to 9% additional growth in FFO per share each year. This should easily support the company’s plan to increase its dividend by 5% to 9% per year over the long term.
The company is also investing in emerging technologies such as hydrogen and carbon capture, which represent potentially huge market opportunities. Moreover, she sees a huge opportunity to help other companies in their energy transition. Such projects could include taking over utilities and making investments to reduce their carbon footprint, as well as building electric vehicle charging infrastructure. The company recently launched a $15 billion investment fund focused on energy transition and sees the potential to grow this business to over $200 billion in the future.
By continuing to evolve and invest in emerging trends before they become mainstream, Brookfield should be able to continue to find new sources of growth if the old ones dry up. This increases the likelihood that it can continue to generate a growing stream of steady cash flow to support dividends in the decades to come.
Lots of power to maintain its dividend
Few companies are better positioned than Brookfield Renewable to pay a sustainable dividend. It takes a holistic approach to the global energy transition, diversifying across technology and geography. This provides it with multiple opportunities for future growth. The company should have no trouble continuing to grow its cash flow and dividends for decades to come, suggesting that Brookfield can provide investors with passive income for life.
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Matthew DiLallo holds positions at Brookfield Renewable Corporation Inc. and Brookfield Renewable Partners LP The Motley Fool holds positions and recommends Brookfield Renewable Corporation Inc. The Motley Fool has a Disclosure Policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.