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Brookfield Renewable Partners L.P. (BEP)
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Brookfield Infrastructure Partners LP Limited Partnership Units (BIP)
Q: I'm looking at BIP and BEP primarily for dividend reliability and some growth. According to Morningstar, they both have very low return on assets (somewhat understandable given that they are very asset heavy) but also return on equity.
Normally, that would be enough for me to avoid the stock but they are both generally well thought of by analysts. What am I missing?
Thanks
Peter
Normally, that would be enough for me to avoid the stock but they are both generally well thought of by analysts. What am I missing?
Thanks
Peter
5i Research Answer:
Return on assets is low; however, due to their corporate structure (limited partnerships) each tends to have significant accounting charges which lowers GAAP earnings but not cash flow. This can impact ratios and make things look worse than they are. Focusing on cash flow with these is a better comparison. For example, BEP generated nearly $2B US in cash flow last year, against its market cap of C$19B. But accounting earnings were actually negative.