Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) just increased its cash distribution by 5.1% to an annualized payout of US$2.06 per unit. That implies a yield of 7% at US$29.29 per unit.
A Sustainable Dividend
In 2018, it increased its funds from operations (“FFO”) per unit by nearly 14%, resulting in a payout ratio of <91% for the year, which was a meaningful improvement from 2017’s payout ratio of 98%. The lower payout ratio makes a safer dividend.
Management aims for cash distribution growth of 5-9% per year in the stock. It’s conservative to assume a cash distribution growth rate of 5% because, since 2011, its distribution has compounded at a growth rate of 5.4%.
A Global Portfolio
BEP has a large and diversified portfolio of assets. It has a generating capacity of +17,400 MW with 870 facilities across 25 markets in 15 countries. 76% is hydro-electric generation, 20% is wind generation, and 4% is solar generation.
BEP is Well Managed
During 2018, the company has reworked its debt so that it no longer has any material debt that it needs to pay back until 2023. Moreover, in the process, it reduced its average interest rate to 5.4% from 2017’s 5.8%.
BEP maintains an S&P credit rating of “BBB+”, which is two notches better than the minimum investment-grade rating of “BBB-“. It’ll also increase its available liquidity to +US$2.2 billion once it closes the planned/signed asset sales. This will give it more financial flexibility.
BEP is continuing its expansion in the U.S., as well as, building its operating teams in Europe, India, and China for long-term growth. Currently, Europe, India, and China only contribute 5% to its power generation. So, there’s a lot of growth potential internationally.
Using rough estimation, an investment in BEP today can deliver an estimated annualized total return of ~12% (from a 7% yield + 5% growth).
Here are more safe dividend stocks to consider on dips.
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Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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