Top Picks 2020: Brookfield Renewable Partners (BEP)

01/21/2020 5:00 am EST


Gordon Pape

Editor and Publisher, The Income Investor and the Internet Wealth Builder

Last year, Gordon Pape, editor of Internet Wealth Builder, selected Canada-based info tech firm CGI, Inc. (GIB) as his Top Pick for conservative investors. The shares rose 37%. This year, he turns to an idea in the renewable space.

Renewable energy is suddenly a hot item with investors and the sector we turn to for our favorite conservative investment idea for the coming year.

Brookfield Renewable Partners (BEP) — a Bermuda-based limited partnership — is one of the global leaders in the field with a portfolio that consists of over 18,000 MW of capacity and 5,253 generating facilities in North America, South America, Europe and Asia.

It has almost 900 generating facilities in North America, South America, Europe and Asia. The majority of the assets (75%) are in hydroelectric power. Brookfield Renewable Partners also operates wind, solar, distributed generation, and storage facilities.

The investment objective is to deliver long-term annualized total returns of 12%–15%, including annual distribution increases of 5–9% from organic cash flow growth and project development. 

The price moved sharply higher recently after the partnership announced plans for a more tax-efficient spin-off, that will result in investors receiving one share of the new entity for every four units of the partnership they own – effectively a tax-free share split. The new company will be listed on the Toronto and New York stock exchanges. Brookfield expects to complete the process in the first half of 2020.

The class A shares will be structured with the intention of providing an economic return equivalent to the partnership units, including identical distributions, and will be exchangeable, at the shareholder's option, for one BEP unit. This is a long-term growth story with an excellent 4.5 per cent yield.

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