The Rule of 72 is a simple financial formula that helps investors determine how quickly they can double their money. Dividing 72 at the expected rate of return, the result is the number of years it would take for the investment to double in value based on that return.
For example, if an investment yields a 15% return, the investor’s money will double within five years (72/15=4.8). An average annual return of 15% is stock market average return With a profit of 9.4% over the last 50 years, many companies could reach that level of profitability in a short period of time.
Brookfield Renewable (BEP 1.49%) (BEPC 1.95%) and NextEra Energy Partners (nep 2.87%) It stands out as a stock with mid-teen total return potential over the next few years. This is the driving force behind that view.
Ahead of strong growth
Brookfield Renewable has achieved 17% annual gross revenue over the past five years and 16% since inception. This beats the company’s goal of generating 12% to 15% of total annual revenue over the long term.
of Renewable energy Juggernaut has the potential to generate total returns above the high end of its long-term target range over the next five years. As the next slide shows, there are several factors that raise funds from operations (FFOMore) at least 10% compounded annually until 2027:
Image Source: Brookfield Renewable.
The company has already secured and funded enough opportunities to grow at an annual rate of 8% during that period. Add in a 4% dividend yield and the company expects 5% to 9% annual growth, giving Brookfield the power to generate an average annualized return of 12%.
But there is good reason to be optimistic that we can achieve the double-digit FFO per share growth needed to generate mid-teenage total returns. The drivers are:
- Rising inflation.
- Growing demand for renewable electricity.
- Large reproducible project backlog.
- Acquisition.
The company recently secured a breakthrough dealWe have partnered with several other companies and investors to acquire Australian utilities origin energy (Organization -0.12%)This will allow Brookfield to lead the decarbonization of the company by building renewable energy capacity and retiring Origin’s coal-fired power plants. These investments should grow your cash flow. This is the first of many decarbonization-focused investments that Brookfield Renewable will make over the next few years.
High Octane Dividend Growth
NextEra Energy Partners has averaged 12.9% annual gross revenue over the last five years. Clean energy infrastructure companies could generate even higher revenues in the years to come.
Image Source: NextEra Energy Partners.
As this slide shows, the company expects its dividend per share to grow at an annual rate of 12% to 15% through at least 2026. Right now, its dividend yield is over his 5%, which could easily deliver a total return in the mid-10%+ range. .
The company has several growth drivers.The big ones are acquiring renewable energy assets in operation from their parent companies next generation energy (Hey you 0.30%)The two companies have completed several drop-down deals over the years, including an interest in 1.2 gigawatts of renewable energy and storage assets last year. These transactions will allow NextEra Energy to repurpose capital into new developments. Meanwhile, they will provide incremental income to NextEra Energy Partners to increase the dividend. NextEra Energy has a large and growing portfolio of renewable energy assets that can be dropped into affiliates to fully enhance its dividend growth plan.
NextEra Energy Partners may also purchase assets from third party sellers. For example, we purchased about 400 megawatts of electricity. wind energy Acquired $733 million portfolio in 2021 from Brookfield Renewable. You can also invest in organic expansion projects of your existing portfolio. Opportunities for organic growth include adding storage batteries to wind or solar assets and replacing turbines with newer, more powerful ones to power conventional wind farms. These external opportunities increase the likelihood that NextEra Energy Partners will be able to achieve its dividend growth strategy.
high dividend stocks
Brookfield Infrastructure and NextEra Energy Partners are benefiting from the decarbonization megatrend. We offer them many opportunities to grow their portfolio, expand their cash flow and increase their dividends. That combined income and profit growth should empower them to generate total returns approaching their mid-teens.They can double an investor’s capital in less than five years. .
Matthew DiLallo has held positions at Brookfield Renewable, Brookfield Renewable Partners, NextEra Energy, and NextEra Energy Partners. The Motley Fool invests in and recommends Brookfield His Renewables and NextEra Energy. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool’s U.S. headquarters has a disclosure policy.
