This High-Yield Dividend Stock's Smart Strategy Pays Big Dividends
In This Article:
Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) has done a fantastic job paying dividends over the years. The renewable energy giant has increased its payout (which currently yields around 5%) by at least 5% annually for 13 straight years.
Several factors have helped power this steady rise. A big driver is its smart capital recycling strategy. The global renewable energy company will acquire assets on a value basis, operate them and enhance their value, and eventually sell them to recycle the capital into higher-returning new investments.
Brookfield Renewable is in the process of showcasing the value of this strategy, which should provide it with even more ability to grow its high-yielding dividend.
Cashing in on Saeta Yield
Brookfield routinely buys renewable energy assets based on their upside potential from operational improvements or development projects.
It capitalized on one such opportunity in 2018. The company had acquired a controlling stake in TerraForm Power, which it used to buy Saeta Yield from a Spanish construction group. That company operated a one gigawatt (GW) portfolio of wind and solar assets in Europe. TerraForm paid about 1 billion euros (roughly $1.2 billion at the time) for the company. Brookfield would eventually acquire full control of TerraForm and thus Saeta Yield.
Brookfield is now looking to cash in on the value of Saeta, which it puts at about 1.7 billion euros ($1.8 billion). Saeta owns 28 wind farms, 10 photovoltaic parks, and seven solar thermal plants in Spain and Portugal.
Brookfield plans to sell all but the thermal plants. That deal, which Reuters recently reported is down to four bidders, would supply it with cash to recycle into new investment opportunities.
Securing a high-powered growth opportunity
Brookfield has lots of opportunities to reinvest those proceeds. One that it's working to capture is Neoen, a French renewable energy development company.
Last month, Brookfield and its partners agreed to buy a majority stake in the company from a block of existing shareholders. It will acquire 53.1% of the company from those investors and then make an all-cash mandatory tender offer to buy out the remaining investors.
The deal values Neoen at $6.5 billion. The company has 8.3 GW of operating and under-construction solar, wind, and energy-storage facilities in France, Finland, Mexico, and Australia.
It also has about 20 GW of advanced development projects in its pipeline across Australia, France, and Nordic countries. That pipeline would add to Brookfield's already massive 157 GW of projects around the world. Buying Neoen is a unique opportunity to accelerate its ability to develop renewable energy projects to support the clean energy transition and surging demand from AI and cloud computing.