With shares down nearly 15%, is now the time to buy this high-yielding energy stock?

Brookfield Renewables (BEPC -0.18%) (BEP) it is currently about 15% below its 52-week high. This decrease has PUSHED the renewable energy producer’s dividend yield Above over 5%. It is several times larger than S&P 500his current dividend yield of less than 1.5%.

A high dividend yield it’s not the only draw for Brookfield Renewable. The global leader renewable energy the manufacturer is growing rapidly. Add that to its lower valuation, and the company could produce supercharged total returns for years to come. That makes now an excellent time to buy stocks.

A profitable passive income stream

Brookfield Renewable has been a great income generating investment over the years. The renewable energy company has been handing out cash to its investors since 2001, growing its payout at a 6% compound annual rate. in that time frame. He scored the 13th Justice year of increasing the payment by at least 5%.

The company supports its profitable and steadily growing payments with sustainable cash flows. It sells approximately 90% of the power generated by its diversified global portfolio of renewable energy assets under long-term contracts with utilities and large corporate buyers. Most agreements link energy rates to inflation, accounting for 70% of its revenues. These contracts provide Brookfield with an ever-increasing cash flow. Only inflation should boost it funds from operations (FFO) by 2% to 3% per year.

Brookfield complements its stable cash flow profile with a strong balance sheet. It has a solid investment-grade credit rating and uses primarily long-term, fixed-rate debt. The company also has plenty of cash, with $4.4 billion at the end of the second quarter, which it routinely replenishes through recycling capital. It expects to generate about $1.3 billion in proceeds from asset sales this year to fund new investments and maintain its financial flexibility.

Strong engines of growth

While Brookfield’s profitable distribution is a big draw, it’s only part of the investment thesis. The company is delivering strong earnings growth. It has grown its FFO per share at an annual rate of 12% since 2016. It expects to keep growing its revenues at a double-digit rate until at least 2028.

In addition to inflation-driven rate increases, Brookfield anticipates that its margin-enhancing activities — for example, providing ancillary services to existing customers and securing higher rates on its uncontracted capacity — will add another 2% to 4% to FFO per share. every year. In addition, the company has a massive development pipeline. It at present is expected to complete 7 gigawatts of development projects this year and is expanding to commission an average of 10 GW annually over the next few years. Development projects should add another 3% to 5% to FFO per share each year.

Finally, Brookfield expects that its capital recycling strategy will allow it to continue to complete additional M&A transactions to increase its FFO per share growth rate. in THE double digits. The company has secured three new deals this year. Brookfield and its partners are buying a European renewable energy producer Neocene in a two-step transaction, a $540 million investment. The company also bought Leap Green, a leading Indian wind-focused company, with an investment of $40 million; and made its first investment in South Korea, with Hanmaeum Energy for $100 million.

Brookfield Renewable’s rapidly growing earnings should support continued dividend growth. He aims to increase his pay by 5% to 9% per year.

Strong total return potential

Thanks to its sale, Brookfield Renewable provides investors with a solid income stream at present producing more than 5%. This provides investors with a solid underlying return. Additionally, it expects to grow its FFO per share by more than 10% annually and its dividend by 5% to 9% annually. Add it all up, and Brookfield should have the power to generate average annual total returns in the mid-teens. That’s a strong return from a higher yielding dividend stock. That combination of income, growth and value makes Brookfield look like one very compelling stocks to buy right now.