Brookfield Renewable’s already strong growth potential could accelerate in the future.
Brookfield Renewable (BEPC -2.40%) (BEP -1.11%) has done an absolutely magnificent job paying dividends over the years. The renewable energy producer has increased its payout by at least 5% annually for the last 13 straight years. That steady growth has helped drive its dividend yield up to nearly 5%.
The leading renewable energy dividend stock expects to continue increasing its payout in the future, targeting 5% to 9% annual growth. Given its robust growth prospects, which are only growing stronger thanks to artificial intelligence (AI), dividend growth toward the high end of its range seems increasingly likely.
Getting bigger and better
Brookfield Renewable has grown briskly over the years. The company’s funds from operations (FFO) have risen at a 12% compound annual rate since 2016. Meanwhile, Brookfield has increased its dividend at a 6% compound annual rate since 2001.
Several factors have helped power its growth. Its foundation is the stable and growing cash flow produced by its globally diversified renewable energy platform. Brookfield sells about 90% of the power it produces under long-term contracts with utilities and large corporate buyers. The bulk of those contracts index rates to inflation. That enables it to generate predictable and steadily rising earnings from its legacy portfolio.
The company also invests money to build and buy additional income-generating renewable energy assets. It has expanded into new areas (e.g., offshore wind, energy storage, and sustainable solutions) and new geographies. These investments have grown its scale while providing new growth opportunities.
Brookfield has grown rapidly while maintaining a strong financial foundation. Its dividend payout ratio has steadily declined because FFO per share has grown faster than its payout. Meanwhile, it has increasingly utilized capital recycling to fund accretive new investments and preserve its financial strength. Because of that, Brookfield has one of the strongest balance sheets in the renewable energy sector.
Powerful growth catalysts
Brookfield Renewable expects to continue growing briskly in the future. It sees inflation powering 2% to 3% annual FFO per share growth through at least 2028. On top of that, it anticipates that margin enhancement activities across its existing portfolio (like providing ancillary services to existing customers) will drive another 2% to 4% annual FFO per share growth. That’s 4% to 7% growth from its existing portfolio without investing much, if any, additional capital.
Meanwhile, Brookfield has built a massive development pipeline. It has acquired several renewable energy development platforms over the past few years. That has enabled it to build up a staggering pipeline of 157 gigawatts (GW) of renewable energy projects in various stages of development. That’s several times more than its current operating capacity of 32.5 GW.
In addition, Brookfield has a growing sustainable solutions business, including carbon capture, biofuels production, recycling, and solar panel manufacturing. The company estimates that its development pipeline can add another 3% to 5% per share each year to its FFO.
On top of all that, Brookfield expects to continue making accretive acquisitions to boost its growth rate. For example, it’s currently working on a deal to buy leading global renewable energy developer Neoen. Brookfield believes that acquisitions will help drive its FFO growth rate into the double digits.
AI could supercharge Brookfield’s already robust growth prospects. The technology uses a tremendous amount of power. That’s driving companies to ensure they have the power they’ll need in the future.
For example, Brookfield recently signed a staggering 10.5 GW renewable energy development deal with tech titan Microsoft. That contract was nearly eight times higher than the largest corporate power purchase agreement ever signed. Brookfield will deliver those projects to Microsoft between 2026 and 2030 to power its cloud and AI data centers in the U.S. and Europe. The companies could expand the agreement in the future to additional regions.
The Microsoft deal could be the first of many Brookfield signs to help power AI data centers. Those deals could enable the company to grow even faster in the future, giving it more power to increase its dividend.
Powerful total return potential
Brookfield Renewable’s focus on renewable energy has paid big dividends over the years. It could supply the company with even more powerful growth in the coming decade, especially if AI supercharges demand for renewables. The company’s rapidly growing earnings should enable it to continue increasing its dividend at a healthy rate and help fuel powerful total returns. That income and upside potential make it look like a great dividend stock to buy and hold for the long term.
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.
