Brookfield Renewable Corp. (BEPC) invests in renewable energy assets on five continents and pledges to be as environmentally friendly as possible. The stock pays a 5.5% dividend yield, but given the problems in the ESG (environmental, social, and governance) space these days, can investors rely on that yield in the future? Let’s explore that now, writes Marc Lichtenfeld, chief income strategist at Wealthy Retirement.
Brookfield Renewable Corp. is similar to its sister company Brookfield Renewable Partners (BEP), except it is a regular “C corporation” that issues a 1099-DIV, while the partnership issues a K-1 statement. The corporation was set up so investors who prefer not to be in a partnership would still have a way to invest in the company.
Because the corporation was set up after the partnership, it reports results the same way the partnership does. It uses funds from operations (FFO) as its measure of cash flow, which is common for partnerships.
In 2023, Brookfield Renewable Corp. generated $1.1 billion in FFO, up from $612 million the year before. In 2024, FFO is forecast to soar to over $1.3 billion.
The company paid out $499 million in dividends in 2023, good for a payout ratio of 46% based on its FFO. This year, the dividend is forecast to rise to $1.42 per share. But due to the huge, expected boost in FFO, the payout ratio should dip to 40%. So, the dividend remains quite affordable.
Now, the company does have a short history of paying dividends, having just started paying one in 2020. But it has raised the dividend every year since, including a 5% boost for the first quarter of 2024.
In sum, Brookfield Renewable can easily afford its dividend. The only mark against the company is its shorter track record, which makes it slightly unpredictable. But I’m not worried about this dividend for the next 12 months.
Recommended Action: Buy BEPC.
