Why Brookfield Renewable Rallied More Than 11% in June

Key Points

• The overall market rallied sharply last month as tariff fears faded.

• Brookfield Renewable is benefiting from surging power demand.

• The company anticipates rapid growth over the next decade.

Shares of Brookfield Renewable (NYSE: BEPC) surged 11.5% in June, according to data provided by S&P Global Market Intelligence. There was no specific catalyst powering the renewable energy dividend stock last month. Instead, it jumped due to the overall rally in the stock market and its strong growth potential.

Increased optimism about what's ahead

The S&P 500 (SNPINDEX: ^GSPC) rallied sharply last month, rising 5% as fears of a tariff-driven recession started to fade. After plunging in April, stocks have recovered over the past couple of months as the U.S. paused many of its tariffs while closing in on trade deals with several key partners. That eased the pressure on the economy and stock prices last month. The rally in the market helped lift shares of Brookfield Renewable.

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The renewable energy company is also riding the wave of surging electricity demand. Catalysts like artificial intelligence (AI) data centers, the onshoring of manufacturing, and the electrification of everything are driving robust demand for power around the world. The International Energy Agency expects global electricity demand from data centers to more than double by 2030 to around 945 terawatt-hours. That's slightly more than the entire electricity consumption of Japan.

The robust demand for power, especially from clean energy sources like renewables, is benefiting Brookfield Renewable. It's signing long-term power purchase agreements (PPAs) with companies to support its massive and growing backlog of development projects. For example, the company secured contracts to deliver an incremental 4.5 gigawatt-hours of power per year to customers during the first quarter. These PPAs support the company's plans to scale its development capabilities to 10 GW per year by 2027, up from 8 GW this year.

Brookfield also continues to accelerate its growth by making acquisitions. It completed its acquisition of Neoen earlier this year. The deal adds 8 GW of operating or under construction wind, solar, and storage assets. In addition, Neoen has 20 GW of projects in its advanced-stage pipeline across Australia, France, and the Nordics.

The company also agreed to buy National Grid Renewables, a leading U.S. onshore renewable power operator and developer. That transaction will add 3.9 GW of operating or under construction assets, a 1-GW construction-ready portfolio, and over 30 GW of solar and energy storage development projects.

Is Brookfield Renewable still a buy after last month's rally?

Brookfield Renewable expects rising power prices, development projects, and acquisitions to drive more than 10% annual growth in its funds from operations (FFO) per share over the next decade. That's rapid growth for a company that also offers a high-yielding dividend (still over 4% after last month's surge). That combination of growth and income still makes it look like a great long-term investment, even after last month's rally.

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Matt DiLallo has positions in Brookfield Renewable. The Motley Fool recommends Brookfield Renewable and National Grid Plc. The Motley Fool has a disclosure policy.