There's no sure thing in investing. However, Brookfield Renewable(NYSE: BEPC) (NYSE: BEP) is about as can't-miss as they come.
The leading global renewable energy producer has tremendous visibility into its ability to grow rapidly over the next decade. Add in its high-yielding and steadily rising dividend, and the company seems like a lock to produce an above-average total return over the next 10 years. That makes it a great stock to buy and hold for the long term right now.
Embedded growth without investing a dime
Brookfield Renewable operates one of the world's largest renewable energy platforms. It sells about 90% of the electricity it produces under long-term power purchase agreements (PPAs) with utilities and large corporations that have a weighted average remaining term of 13 years. Roughly 70% of its PPAs link power rates to inflation. That enables it to generate high-quality, durable, and steadily rising cash flow.
Brookfield estimates that a modest inflation rate (2%-3% annually) will power 2% to 3% annual funds from operations (FFO) per-share growth for the foreseeable future from the inflation escalation clauses in its PPAs alone.
Meanwhile, Brookfield estimates that its legacy portfolio will generate another 2% to 4% annual FFO per-share growth each year from margin enhancement activities. One factor is its ability to capture higher power prices on its uncontracted capacity. In addition, it's capturing much higher prices as legacy hydro PPAs expire.
For example, this year, Brookfield contracted 740 gigawatt hours (GWh) of hydro for more than 10 years at strong prices, which will add $50 million to its annual FFO. Another 3 GW of capacity is available for recontracting over the next five years, representing meaningful upside potential.
Brookfield doesn't have to invest any capital to capture this growth. On the contrary, legacy assets producing more cash provide the opportunity toadd more financing (upfinancing) and generate additional capital. For example, it recontracted 450 megawatts of hydro capacity this year, which empowered it to raise $500 million in upfinancing proceeds.It could generate more than $3 billion of additional capital from its hydro assets alone over the next five years by recontracting those assets and then upfinancing them.
Deploying capital to supercharge its growth
While Brookfield doesn't need to invest capital to grow its FFO per share at a healthy rate, it plans to invest $8 billion to more than $9 billion over the next five years into its development pipeline and M&A growth opportunities. It intends to fund those investments through upfinancings, capital recycling, strategic privatizations, and other options.
The company has a massive development pipeline, with a staggering 200 GW of projects. Brookfield believes it can commission about 10 GW of capacity annually for the next several years, an acceleration from the 7 GW it expects to complete this year. Development projects should add 4% to 6% to its FFO per share each year.
It's increasingly building projects for large corporate customers, especially those in the technology sector. For example, it signed the largest-ever corporate PPA with Microsoft earlier this year. It will deliver over 10.5 GW of new power capacity over five years (2026-2030) in the U.S. and Europe, with the potential to increase its scope beyond those regions. That adds to the nearly 1 GW of power Microsoft had previously agreed to buy from Brookfield.
Finally, Brookfield expects to continue making accretive acquisitions. The company and its partners most recently agreed to buy French renewable energy developer Neoen in a two-phased transaction valued at around $10 billion. Neoen focuses on three of the fastest-growing renewable energy markets (France, Australia, and the Nordics), areas where corporate power buyers are particularly active.
Brookfield is currently evaluating around $100 billion of potential M&A opportunities in its pipeline. Accretive M&A helps drive Brookfield's view that it can grow its FFO per share at a more than 10% annual rate in the coming decade.
Layers upon layers of growth
Brookfield Renewable has a multitude of growth drivers. Its organic drivers alone should fuel 8% to 13% annual FFO-per-share growth through at least 2029, with increasing visibility all the way to 2034. Meanwhile, accretive M&A activities should help propel its growth rate above 10% annually. That easily supports the company's plan to increase its roughly 4.5%-yielding dividend by around 5% to 9% annually.
Add the income to its high-powered growth rate, and Brookfield appears to have the capacity to produce total annualized returns in the mid-teens over the next 10 years. With a large portion of that growth already secured, Brookfield Renewable seems like a can't-miss investment opportunity.
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Matt DiLallo has positions in Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Brookfield Renewable and Microsoft. The Motley Fool recommends Brookfield Renewable Partners and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
