Brookfield Renewable: Top Dividend Stock to Consider in June

Dividend income is a key focus for many investors, including those who regularly acquire high-yield dividend stocks. If only one dividend stock could be purchased this June, it would be Brookfield Renewable (NYSE: BEPC)(NYSE: BEP).

High Yielding Dividend Stock

Brookfield Renewable shares have declined over 15% from their 52-week high, which has pushed its dividend yield above 5%. This yield significantly outpaces the S&P 500’s yield of less than 1.5%.

The company secures its dividend payouts through stable cash flows. Approximately 90% of the electricity it generates is sold under long-term, fixed-rate power purchase agreements (PPAs) with an average term of 14 years, 70% of which are indexed to inflation. Its strong investment-grade balance sheet further supports its dividends.

Brookfield Renewable maintains a solid track record in dividend payments, with a 6% compound annual growth rate since 2001. It has increased its dividend by at least 5% each year for the past 14 years.

Projected Growth for the Next Decade

The company anticipates 5% to 9% annual growth in its high-yielding dividend. This outlook is based on robust growth from its inflation-linked PPAs, expected to contribute 2% to 3% annual growth in funds from operations (FFO) per share. Rising market rates for power will allow Brookfield to secure higher rates on future PPAs, potentially adding an extra 2% to 4% growth.

Brookfield is also developing new renewable energy capacity, expecting to commission 8 gigawatts (GW) this year and ramping to a 10 GW annual run rate by 2027. This growth could result in an additional 4% to 6% annual FFO per share growth through 2030.

The company actively recycles capital by divesting mature assets to reinvest in higher-return projects. Recently, it sold its interest in First Hydro for nearly three times its invested capital and offloaded 25% of its Shepherds Flat wind farm at almost double the original investment. Additionally, it acquired European renewable energy developer Neoen and National Grid’s U.S. renewable platform, which should further enhance FFO growth.

In summary, Brookfield Renewable is targeting a more than 10% annual growth rate in FFO per share for the foreseeable future, aided by well-secured provisions extending through 2034.

Significant Total Return Potential

Brookfield Renewable aligns with investor expectations for a reliable dividend stock. It provides a high-yield dividend backed by a solid financial structure and has a strong history of increasing payouts, with a promising outlook for total return.

With a 5% dividend yield and anticipated earnings growth over 10% yearly, total annual returns could exceed 15%, particularly given the current lower share price. This blend of income and potential growth makes it an attractive option for June.

Investment Considerations for Brookfield Renewable

Before investing, it’s essential to note that Brookfield Renewable was not listed among the top 10 stock picks identified by a recent analyst report.

Investors might consider the historical performance of recommended stocks, such as Netflix and Nvidia, which yielded substantial returns over the years.

Given Brookfield Renewable’s solid financial foundation and growth prospects, it remains a noteworthy candidate for dividend stock investment this month.

Matt DiLallo has positions in Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable, Brookfield Renewable Partners, and National Grid Plc.

The views expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.