In a year marked by market volatility, Brookfield Renewable (NYSE: BEP) (NYSE: BEPC) has navigated the challenges with strategic acquisitions and share buybacks, positioning itself for sustained growth. CEO Connor Teskey has expressed confidence in the company's future, citing over $840 million in funds from operations (FFO) generated in the first nine months of 2023 and a 10% increase in FFO resulting from key acquisitions.
Despite shares falling nearly 30% from their 52-week high, Brookfield Renewable has been active in expanding its portfolio. The company secured a 50% interest in X-Elio, acquired Duke Energy (NYSE: DUK )'s commercial renewable energy business, and is poised to complete the acquisition of Banks Renewable. These moves are part of a broader strategy to invest $1.5 billion in mergers and acquisitions (M&A), which is expected to add $200 million to the annual FFO.
The company's M&A strategy extends to deals for Westinghouse and Origin Energy, as well as a partnership with Axis Energy for additional renewable projects. With these initiatives, Brookfield Renewable forecasts that M&A could drive over 9% annual growth in FFO per share through 2028.
Teskey underscored the resilience of Brookfield amidst higher interest rates and tightening margins that have impacted the renewables sector. He believes that the current market conditions present more opportunities to invest capital effectively. The anticipated growth is also supported by factors like inflation-induced rate increases, margin expansion, and development projects, which could lead to an annual increase in FFO per share of 7% to 12% over the next five years. This growth trajectory will support the company's plan to raise its high-yielding dividend by 5% to 9% annually.
Brookfield Renewable capitalized on the decline in its share price as a buyback opportunity, repurchasing nearly 1.5 million units this quarter. Teskey emphasized that the company will continue to allocate capital towards avenues offering the best risk-adjusted returns, which may include further M&A, development projects, or additional share repurchases.
Having consistently achieved double-digit annual growth in FFO per share over the past decade, Brookfield Renewable aims to maintain this momentum over the next five years through robust M&A activities. Despite current market headwinds, the firm maintains that its strong growth outlook and attractive dividend yield position it as a compelling investment choice.
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