One of the main draws of Brookfield Renewable Partners (NYSE: BEP) is the generous cash distributions it pays investors. Thanks to long-term power supply contracts, the global renewable power company generates tons of steady cash flow, which enables it to pay an eye-catching 5.5%-yielding distribution at the moment.
However, as attractive as that payout is, it's only part of the return story. The other component is the company's compelling growth potential. Thanks to its leading position in the global shift away from carbon-based energy, the company conservatively estimates that it can organically grow funds from operations (FFO) per unit by 8% to 10% annually, which should power 5% to 9% annual growth in the shareholder payout. In addition to that, the company has several acquisitions in the pipeline that could fuel growth well above that forecast. Add those two factors together, and Brookfield appears to have the fuel needed to continue its impressive performance where it has delivered a total return of more than 25% over the past year.
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Having a good year
The primary driver of those gains is the company's ability to grow FFO well above expectations, which is evident from the following table:
FFO per unit
Data source: Brookfield Renewable Partners. TTM=trailing twelve months.
Several factors fueled this exceptional growth rate. In North America, for example, the company's hydro plants generated 6% more power than their long-term average thanks to higher than normal levels of rain. Meanwhile, improving economic conditions in Brazil drove power prices up past their historical norm. That enabled the company to secure several lucrative contracts that locked in excellent power prices for the next few years. In addition to that, the company added several assets to its portfolio over the past year, which provided some incremental earnings.
Setting the stage for an even better year
However, as impressive as this year's results have been, Brookfield appears poised for even better performance in the coming years. The first driver of that view is the company's organic growth initiatives. It currently has $435 million of development projects under construction, which should boost FFO by $45 million to $50 million over the next three years as they come online. On top of that, Brookfield continues to secure higher prices for its clean power as the global economy grows while also improving margins as it increases its global scale. Those factors lead the company to believe that it's "well positioned to deliver per-share FFO growth over the next five years in excess of our 5% to 9% distribution growth targets."
In addition to that compelling organic growth, Brookfield has a knack for making needle-moving acquisitions and has several in various stages of the pipeline that should power results over the next year. The biggest was the purchase of a stake in TerraForm Power (NASDAQ: TERP) . The company noted that TerraForm Power's portfolio of stable revenue producing wind and solar plants should add $40 million in FFO to its bottom line over the next year, which represents a 6% increase on a per unit basis. On top of that, Brookfield said that it expects TerraForm Power to "provide a meaningful ongoing contribution" to its financial results in future years as the company organically grows cash flow . Meanwhile, Brookfield made two other acquisitions last quarter, buying a 25% stake in First Hydro as well as a small wind farm in Northern Ireland. Combined these three transactions cost Brookfield $278 million but should generate about $50 million in FFO per year.
Further, it's working on closing the acquisition of TerraForm Global (NASDAQ: GLBL) . That deal could close later this month and would add another portfolio of revenue generating wind and solar assets to move the needle further. Beyond that, Brookfield expects to invest $600 million to $700 million per year on acquisitions, which could provide it with the fuel to grow FFO well above the high-end of its guidance range.
A bright outlook for investors
Brookfield Renewable Partners has generated excellent returns for investors over the past year thanks to healthy organic growth from its existing portfolio. However, even better days appear up ahead since it has several organic growth initiatives underway and a slew of needle-moving acquisitions in the bag, which gives it the potential to deliver electrifying growth in the coming years. The increased cash flow from those duel growth engines should push the company's already compelling dividend even higher, making it an excellent stock for both growth and income investors to consider.
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Matthew DiLallo owns shares of Brookfield Renewable Energy Partners. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .