Brookfield Renewable Energy Partners (BEP): 2019 Top Picks' Mid-Year Update

07/16/2019 5:00 am EST

Focus: ENERGY

Roger Conrad

Chief Analyst/Managing Partner, Capitalist Times

Roger Conrad, editor of Conrad's Utility Investor, chose Brookfield Renewable Energy Partners (BEP) as his top investment idea for 2019. The stock rose 33.5%% in the first half of the year. Here's the latest update on the  renewable energy play.

Brookfield Renewable Energy — which trades on both the NYSE and the Toronto exchange — is up strongly so far in 2019 for several reasons.

First, the owner of contracted hydro, wind and solar assets continues to execute its business plan of adding assets and profitably recycling capital.

Q1 funds from operations, the company’s primary measure of profitability increased 18 percent, as management made successful investments in Canadian power company TransAlta and in Indian wind power.

That’s kept the company on track to continue meeting its annual dividend growth target of 5-9 percent, Second, shares we’re coming off a low end-2018 valuation, returning to more historically normal earnings and dividend multiples.

Third, the Canadian dollar has risen from about 72 US cents to more than 75 cents, with a corresponding gain in the US dollar value of BEP. The shares have also arguably benefitted from investment appeal for dividend stocks at a time when the US Federal Reserve is again considering rate cuts.

All of these trends should continue to lift Brookfield’s returns for the rest of the year. Though gains are likely to be tempered by the stock’s returns so far, I continue to rate Brookfield a buy up to $35 for investors interested in a safe yield growing at a mid-single digit annual rate, with commensurate capital gains.

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