Canadian retirees should consider supplementing their retirement benefits with passive income from prime dividend stocks. The ideal dividend stock offers shareholders a tasty dividend yield and the potential to generate additional returns through capital gains. Furthermore, the best dividend stocks should be positioned to generate cash flows across business cycles and increase these payouts over time.
Valued at a market capitalization of $19.4 billion, Brookfield Renewable Partners (TSX:BEP.UN) is an overlooked dividend giant that should be part of your retirement portfolio in 2025. The TSX dividend stock is down 20% and offers you a forward yield of over 5%.
Despite the continued decline, BEP shares have returned 275% to shareholders over the past decade, after adjusting for dividend reinvestments.
Is this TSX dividend stock a good buy?
Brookfield Renewable Partners delivered strong results in the second quarter, with funds from operations (FFO) per unit increasing 10% year over year, helping the company achieve its full-year growth target.
The renewable energy giant commissioned 2.1 gigawatts of new capacity this quarter and expects to bring about eight gigawatts online in 2025, which would set a company record.
This quarter’s notable development came from a groundbreaking framework agreement with Google to deliver up to three gigawatts of hydroelectric capacity in the United States.
This follows last year’s landmark agreement Microsoft for more than 10.5 gigawatts of renewable energy capacity, strengthening Brookfield’s position as the preferred energy solutions partner for global technology companies.
BEP has already secured the first two contracts within the Google framework, for a total of 670 megawatts of capacity, from facilities in Pennsylvania, with terms of 20 years at attractive prices.
Management highlighted that hyperscalers are expanding their energy purchasing strategies beyond traditional wind and solar to include hydro and nuclear energy at scale.
This shift responds to growing concerns about the reliability of the power grid amid rising energy demand driven by the expansion of artificial intelligence and cloud computing. Brookfield’s diversified portfolio in hydro, wind, solar, nuclear and battery storage uniquely positions the company to meet these evolving customer needs.
BEP’s nuclear services business in Westinghouse is poised to gain ground over the next decade. Westinghouse operates approximately two-thirds of the world’s nuclear power fleet and underlies half of the world’s operating reactors.
Recent U.S. executive orders aim to build 10 gigawatts of large-scale nuclear reactors by 2030, positioning Westinghouse as the primary beneficiary given its advanced utility-scale reactor technology.
Brookfield continues to execute on its asset recycling strategy, selling assets for expected proceeds of approximately $1.5 billion since the beginning of the second quarter, with net sales of $400 million to Brookfield Renewable at strong returns.
Management expects total proceeds from asset sales to exceed last year’s levels in 2025, while returns will remain at or above targets. With a 230 gigawatt development pipeline and robust demand fundamentals, Brookfield’s growth story is far from over.
Are BEP shares undervalued?
Brookfield Renewable Partners has increased its annual dividend from US$0.95 per share in 2016 to US$1.42 per share in 2024, indicating an annual growth rate of 5.2%.
Analysts who follow Brookfield Renewable stock predict that adjusted funds from operations will rise from US$1.69 per share in 2024 to US$2.25 per share in 2027. During this period, dividend per share is expected to rise from US$1.42 to US$1.62. It suggests that Brookfield Renewable’s payout ratio will improve from 84% in 2024 to 72% in 2027.
Brookfield Renewable shares are priced at 18 times earnings, which is reasonable. If it trades at a similar multiple, it could gain 30% over the next two years. After adjusting for dividends, the cumulative return could be closer to 40%.
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