Is Brookfield Renewable Stock a Buy for its 5.4% Yield?

When it comes to buying dividend stocks for your portfolio, finding a name that offers an attractive yield is often top of mind for investors. And with Brookfield Renewable Partners (TSX:BEP.UN) offering a current yield of roughly 5.4%, it’s a stock many investors consider for their portfolios.

Buying higher-yield dividend stocks makes a lot of sense. Ideally, everyone wants to generate as much passive income as possible. But higher-yield stocks often come with trade-offs, such as dividend sustainability issues or lower long-term growth potential because the majority of earnings fund the dividend.

So focusing only on the yield misses the bigger picture entirely, especially with a high-quality stock like Brookfield Renewable.

It’s essential to remember that even when you’re buying dividend stocks, the best long-term investments don’t just pay you today; they’re businesses that can grow cash flow, increase payouts over time, and compound returns for years or even decades. That’s exactly where Brookfield Renewable stands out.

So, while the yield may be attractive and what initially gets investors interested, it’s not the reason why Brookfield Renewable is one of the best dividend stocks to buy now.

Why Brookfield Renewable is such a strong dividend stock

Brookfield Renewable is one of the best stocks to buy and hold for the long-term because it owns and operates a massive global portfolio of renewable power assets, including hydroelectric, wind, solar, and energy storage.

These are essential infrastructure assets that generate electricity every day and are expensive and difficult to replace. Therefore, because these assets are so defensive and because the industry has high barriers to entry, Brookfield consistently generates predictable cash flow, which is exactly what you want out of a dividend stock.

In addition to paying its attractive dividend, though, Brookfield Renewable is also consistently expanding its operations and investing in new projects, which is what allows the dividend stock to pay an attractive dividend but continue to increase it over time.

Brookfield’s long-term potential is what makes it so compelling for long-term investors

Brookfield businesses are well-known for their top-notch management teams and disciplined long-term investing strategies. And when you consider the decades of growth potential the renewable energy industry has, it’s the perfect sector for a stock like Brookfield to own assets in.

Population growth, electrification, and the push to decarbonize power systems around the world are all powerful long-term tailwinds. And Brookfield isn’t just exposed to those trends, it’s one of the largest and most diversified renewable operators globally.

The company has the scale, expertise, and access to capital needed to continue developing new projects and expanding its portfolio for years to come.

So yes, Brookfield Renewable is certainly a buy for its yield. But more importantly, it’s a buy because that dividend is backed by long-life assets, predictable cash flow, and a business model designed to grow over decades.

Most high-yield dividend stocks don’t offer meaningful growth. And most growth stocks don’t offer an attractive yield north of 5%.

Brookfield Renewable is one of the rare stocks that offers both, which is exactly why it’s one of the best dividend growth stocks investors can buy and hold for the long term.

The post Is Brookfield Renewable Stock a Buy for its 5.4% Yield? appeared first on The Motley Fool Canada.

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More reading

• 5 Canadian Stocks to Buy and Hold for the Next Five Years
• Best Canadian Stocks to Buy With $7,000 Right Now
• Why I’m Letting This Unstoppable Stock Ride for Decades
• 2 No-Brainer Energy Stocks to Buy With $1,000 Right Now
• Don’t Bet Against Canada’s Top Dividend Icons Going Into the New Year

Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.