1 high-powered stock to buy and hold for the next 10 years

There is no such thing as a sure thing in investing. However, Brookfield Renewables (BEPC 2.37%) (BEP 1.22%) is about that can’t miss when they come.

The world’s largest producer of renewable energy has extraordinary visibility into its ability to make grow fast in the next decade. Add in high-yielding and steadily growing dividends, and the company looks like a lock to produce above-average total return over the next 10 years. That’s what it does a heavyt stock to buy and hold for the long term right now.

Integrated growth without investing a penny

Brookfield Renewable operates one of the largest in the world renewable energy platforms. It sells approximately 90% of the electricity it produces under long-term power purchase agreements (PPAs) with utilities and large corporations that have a weighted average remaining term of 13 years. About 70% of its PPAs link power rates to inflation. This allows it to generate high-quality, sustainable and ever-growing cash flow.

Brookfield estimates that a modest rate of inflation (2%-3% annually) will fuel 2% to 3% annual funds from operations (FFO) growth per share for the foreseeable future solely from the inflation escalation clauses in its PPAs.

Brookfield, meanwhile, estimates that its legacy portfolio will generate another 2% to 4% annualized FFO per share growth each year from margin-enhancing activities. One factor is its ability to capture higher energy prices on its uncontracted capacity. In addition, it attracts much higher prices as old river PPAs expire.

For example, this year Brookfield contracted 740 gigawatt hours (GWh) of hydropower for more than 10 years at strong prices, which will add $50 million for annual FFO. Another 3 GW of capacity is available for recontracting in the next five yearsrepresenting significant growth potential.

Brookfield does not need to invest any capital to capture this growth. Conversely, legacy assets that produce more money offer the opportunity to do so add more funding (up financing) and generate additional capital. For example, her retracted 450 megawatts of hydro capacity this year, empowering them to raise $500 million up financing receipts. It could generate more than $3 billion in additional capital from its hydro assets single in the next five years of retracting those goods and then up financing them.

Deploying capital to supercharge its growth

While Brookfield does not need to invest capital to grow its FFO per share at a healthy pace, it plans to invest $8 billion to more than $9 billion over the next five years in development pipeline and growth opportunities and mergers and acquisitions. It intends to finance these investments through advance financing, capital recyclingstrategic privatizations and other options.

The company has a massive development pipeline with a staggering 200 GW of pipeline. Brookfield believes it can commission about 10 GW of capacity annually over the next few years. an acceleration from the 7 GW expected to be completed this year. Development projects should add 4% to 6% to FFO per share each year.

Builds more and more projects for large corporate clients, especially those in the technology sector. For example, he signed the largest corporate PPA he has ever signed Microsoft at the beginning of this year. Will ddeliver over 10.5 GW of new power capacity over five years (2026-2030) in the US and Europe, with the potential to increase its scopeit is beyond those regions. Add thiss to the nearly 1 GW of power that Microsoft had previously agreed to buy from Brookfield.

Ultimately, Brookfield expects to continue to make positive acquisitions. The company and its partners most recently agreed to buy a French renewable energy developer Neocene in a two-stage transaction valued at approximately $10 billion. Neoen focuses on three of the fastest growing renewable energy markets (France, Australia and the Nordics), areas where corporate energy buyers are particularly active.

Brookfield is at present valuing around $100 billion of potential M&A opportunities in the pipeline. Accretive M&A helps drive Brookfield’s view that it can grow its FFO per share at an annual rate of more than 10% over the next decade.

Layers upon layers of growth

Brookfield Renewable has a multitude of growth drivers. Its organic drivers alone should fuel annualized FFO per share growth of 8% to 13% through 2029, with increased visibility all the way by 2034. Meanwhile, intense M&A activity should help propel its growth rate above 10% annually. That easily supports the company’s plan to increase its roughly 4.5%-yielding dividend by about 5% to 9% annually.

Add the revenue to its strong growth rate, and Brookfield appears to have the ability to produce mid-teens total annual revenue over the next 10 years. With a large portion of this growth already secured, Brookfield Renewable appears to be a can’t miss investment opportunity.