The world will need a tremendous amount of electricity over the coming years. From the electrification of the transportation sector to the emergence of artificial intelligence (AI), power demand is on track to grow exponentially in the next decade. Forecasters expect data center power demand alone to grow 15-fold by 2030, rising from 2% of global consumption to almost 10% (and up to 20% of total U.S. power demand).
Given the climate goals of global technology companies, renewable energy will play a pivotal role in powering AI data centers. That bodes well for Brookfield Renewable (NYSE: BEPC)(NYSE: BEP), one of the few companies on a global scale to meet their capacity needs. That makes it the best energy stock to buy right now.
Powerful growth prospects
Brookfield Renewable is a global leader in clean energy. It currently has 37 gigawatts (GW) of capacity across several key markets. It sells the power its hydro, wind, and solar facilities produce under long-term, fixed-rate power purchase agreements (PPAs) to utilities and large corporate buyers.
The company is on track to add 7 GW of additional capacity this year alone, a record for its business. Those projects will supply about $90 million of incremental annual funds from operations (FFO). That's a meaningful amount for a company that produced $913 million in FFO through the first nine months of the year.
Brookfield has a staggering 200 GW of projects in its development pipeline, including 65 GW in advanced stages. That gives it lots of visibility into its future growth.
It expects to develop 8.4 GW of additional capacity next year and 9.1 GW in 2026. It's on track to ramp that up to around 10 GW annually in 2027 and beyond, supported in part by its massive 10.5 GW development agreement with Microsoft for capacity in the 2026 to 2030 time frame to support its cloud and AI growth. These development projects should add between 4% and 6% to Brookfield's FFO per share each year through the end of the decade
Development is only one growth driver for Brookfield. Its legacy portfolio should grow its FFO by 4% to 7% annually, powered by inflation-linked rate increases in its PPAs and the likelihood of capturing much higher market rates as existing PPAs expire in the coming years.
On top of all that, Brookfield expects to continue completing accretive merger and acquisition (M&A) transactions. For example, it's in the process of acquiring leading renewables developer Neoen in a two-phased transaction valued at $10 billion. It has a large pipeline of additional deals currently valued at over $100 billion. Add it all up, and Brookfield has the visibility to grow its FFO per share at a more than 10% annual rate through at least 2029 and can likely maintain that elevated pace for the next decade.
An attractive income stream
Brookfield Renewable's portfolio generates a lot of stable cash flow. The company pays a meaningful percentage of that money to shareholders in dividends. It currently pays $0.355 per share each quarter (roughly 77% of its FFO over the past nine months).
With its stock price recently below $32 a share, Brookfield Renewable offers a dividend yield of around 4.5%. That's much higher than the S&P 500's 1.2% dividend yield, near its lowest level in about 20 years. At that rate, a $1,000 investment in Brookfield Renewable would generate about $45 of annual dividend income, compared to roughly $12 from a similar investment in an S&P 500 index fund.
Brookfield has grown its payout at a 6% compound annual rate since 2001 and expects to increase its payment by around 5% to 9% per year in the future. That's a very healthy growth rate for a higher-yielding dividend stock.
High-powered return potential
Brookfield Renewable expects to grow its earnings at a more-than-10% annual rate for the foreseeable future. At that pace, it could double its share price in about seven years.
On top of that, the company has a very attractive income stream that should steadily rise each year. That combination of growth and income should add up to a powerful total return, making Brookfield Renewable an excellent energy stock to buy right now.
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Matt DiLallo has positions in Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Brookfield Renewable and 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
