The Best Energy Stock to Invest $1,000 in Right Now

Brookfield Renewable (BEPC -1.97%) (BEP -2.86%) has been a powerful wealth creator since its formation in 2011. The renewable-energy producer has delivered a 12.2% annualized total return over that period. That has turned a $1,000 investment into over $4,500. The company has grown its funds from operations (FFO) per share at a more than 10% annual rate, giving it the power to increase its dividend by at least 5% annually.

The company could produce even more powerful returns in the future. That potential makes it stand out as one of the best energy stocks to invest $1,000 into right now.

A lucrative income stream

Brookfield Renewable currently offers a very attractive dividend yield of 6%. At that rate, a $1,000 investment could turn into $60 of annual dividend income.

The renewable-energy company’s lucrative payout is on a very sustainable foundation. Driving that view is its very resilient cash flows. The company has locked in prices on 90% of the electricity it produces under long-term power purchase agreements with utilities and large corporate buyers. It links 70% of its revenue to inflation, which drives its view that its existing portfolio will grow its FFO per share by 2% to 3% annually. Meanwhile, margin enhancement activities like selling ancillary products will increase its FFO per share by another 2% to 4% per year.

On top of that stable and growing cash flow, Brookfield has an elite balance sheet. The company has a strong investment-grade credit rating (BBB+) and fixed-rate debt with no material near-term maturities. It also has significant corporate liquidity and partner capital through the investment funds it manages.

Powerful growth ahead

Brookfield Renewable has significant growth potential. Its built-in growth drivers of inflation-linked rates and margin enhancement provide it with a very solid base growth rate.

On top of that, the company has a massive development pipeline. Brookfield Renewable ended last year with 155 gigawatts (GW) of renewable-energy projects under various stages of development, including 24 GW in advanced stages. That’s enormous, considering its current operating capacity is 33 GW. The company is also investing heavily in developing additional sustainable solutions through its investment funds. The company and its partners are investing in carbon capture and storage, renewable natural gas, material recycling, solar panel manufacturing, and green ammonia projects. Brookfield estimates that development projects funded with retained cash flow will add another 3% to 5% to its FFO per share each year.

In addition to organic growth, Brookfield expects to make accretive acquisitions to further enhance its FFO growth rate. It sees M&A activities potentially boosting its FFO per share by more than 9% annually. The company plans to fund deals by recycling capital (selling mature assets to fund higher-return new investments). It agreed to invest $2 billion across several transactions last year, which should boost its cash flow this year. Brookfield expects to deploy $7 billion to $8 billion over the next five years on accretive acquisitions.

Brookfield’s quartet of growth drivers should give it the fuel to increase its FFO per share by more than 10% annually through 2028. That supports its plan to raise its dividend by 5% to 9% per year over the long term. Add in its already high yield, and Brookfield’s growth driver should easily enable it to achieve its aim of producing total returns of 12% to 15% per year.

The potential for powerful returns

Brookfield Renewable has created a lot of wealth for its investors since its formation over a decade ago. Given its high dividend yield and high-powered growth potential, it could make them even more money in the future. That makes it one of the best energy stocks to buy today.

Matt DiLallo has positions in Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Brookfield Renewable. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

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