Stock Pick of the Week (3/16)
Overview
Brookfield Renewable Corporation (BEPC) is a single, structured corporation that combines Brookfield's renewable energy assets. Brookfield is a global leader in alternatives, with over a trillion dollars under management across infrastructure, real estate, private equity, and renewable power. BEPC consists of hydroelectric, wind, solar, distributed energy, and sustainable solutions assets spread out across five different continents. It allows investors to access Brookfield's entire renewable energy portfolio. It differs from Brookfield Renewable (BEP), the predecessor to BEPC, which operates structurally as a partnership of separate assets (rather than a combined corporation).
Renewable Energy
With the growing demand for AI and current geopolitical tensions, demand for renewable energy will only increase. As more AI data centers are built, clean, sustainable energy sources will be needed to power them. The current war in the Gulf has sent the oil market whiplashing, underscoring the need to shift away from fossil fuels and towards renewable energy. Ultimately, given current climate change issues, the way we source energy will have to change sooner rather than later, and the best source of that energy is green.
3 Key-Takeaways
Brookfield has recently signed deals with Microsoft and Google for renewable energy, building 10.5 gigawatts by 2030, specifically for Microsoft. These deals center on AI and the 24/7 energy required to power each company's data centers. On top of deals with AI powerhouses, BEPC has raised its dividends every year for 15 years straight, boasting 5%+ annual growth since 2011 (when it was listed). Because BEPC sells energy under long-term contracts, the income is incredibly stable and reliable. Lastly, they have a 200-gigawatt construction backlog, meaning they have 200 gigawatts worth of work contracted out for the future. All of these projects are funded through “asset recycling,” in which they build a wind or solar farm (for example) and then sell it, pocketing ~2.4x their initial investment and using the profit to fund the next project. This rinse-and-repeat method prevents BEPC from having to issue new stock in order to generate capital.
Why-To-Buy
BEPC gives retail investors a simple, dividend-yielding way to invest in a portion of the world's current and future renewable energy, and it's backed by one of the largest alternative asset managers. With strong tailwinds (meaning favorable market trends) such as an increased demand for AI, climate change making green energy a non-negotiable, and YoY growth with an appealing annual dividend rate, Brookfield Renewable Energy is CFR’s pick of the week!
Something to Note
While last week we suggested Diamondback Energy (FANG), a US-based natural gas and oil company, our renewable energy pick this week does not mean we are becoming bearish on oil. It’s important that investors diversify their portfolios, depending on their investment style, to mitigate risk and give themselves the best possible chance to maximize returns. Maintaining positions in both allows renewables to offset any oil volatility, while oil can offer more immediate returns.