Why Brookfield Renewable Stock Skyrocketed in May

The rock-solid value stock finally found takers after record quarterly numbers, and it could rally even higher. Read More...

The rock-solid value stock finally found takers after record quarterly numbers, and it could rally even higher.

Shares of Brookfield Renewable (BEPC -0.43%) (BEP -0.49%) scripted a dramatic comeback in May, surging double-digits and recouping all of their losses through April and some. While units of the partnership jumped 32.7% in May, corporate shares zoomed 35.7% last month according to data provided by S&P Global Market Intelligence.

What changed so fast in May that sent shares skyrocketing for a stock down nearly 20% this year through April? Investors finally saw value in the renewable energy stock after its record quarterly numbers, a landmark deal with tech behemoth Microsoft, and growth plans including dividend growth.

Impressive earnings and growth moves

Brookfield Renewable kicked off 2024 on a solid note, delivering record funds from operations (FFO) in its first quarter. Its FFO grew 8% year over year, driven by pipeline development and acquisitions. Brookfield Renewable expects to bring nearly 7 gigawatts (GW) of new renewable capacity online this year and generate $1.3 billion in proceeds from the sale of mature assets.

Brookfield Renewable also recently signed a first-of-its-kind agreement with Microsoft to deliver 10.5 GW of renewable energy capacity between 2026 and 2030 for the tech giant’s artificial-intelligence-powered cloud services business. Brookfield Renewable believes there’s potential to extend the scope of the deal beyond the U.S. and Europe in the future into regions like India, Asia Pacific, and Latin America.

Brookfield Renewable is a rock-solid stock to buy now

Brookfield Renewable stock has been one of my highest-conviction stocks for a long time now, and my conviction has only grown with its latest quarterly performance. Brookfield Renewable believes its first-quarter performance positions it well to deliver its target FFO-per-unit growth of at least 10% for the year. That means 2024 should be another record for the renewable energy giant.

Brookfield Renewable expects its FFO per unit to grow by 10% or more between 2023 and 2028, driven by its development pipeline, margin improvements, inflation escalators within contracts, and potential mergers and acquisitions. The company generates nearly 90% of its cash flows from contracts, has a humongous pipeline, and expects to invest $7 billion to $8 billion into growth over the next five years.

Backed by FFO growth, Brookfield Renewable is confident of increasing its annual dividend by 5% to 9%. That’s a lucrative deal for a stock yielding 4.7% — and 5.3% for the partnership units — and value investors were smart to take advantage of the stock’s recent drop to scoop up some shares in May.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield Renewable and Microsoft. The Motley Fool recommends Brookfield Renewable Partners and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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