Behind TerraForm Power Inc's 37% Share Pop Today

What happened 

Brookfield Asset Management's (NYSE: BAM) buyout of TerraForm Power Inc (NASDAQ: TERP) is now complete, and the stock had a strange move higher today. According to Yahoo! Finance, shares are up 37% today, which is technically true based on yesterday's closing price, but it's not quite true for the full value shareholders are holding today.

So what

The buyout offered shareholders a special dividend of $1.94 per share and either $9.52 per share in cash or a share of the new stock. Depending on how investors elected to be paid, Brookfield would prorate the transaction.

As it turned out, Brookfield paid the $1.94 per share dividend, $3.56 in cash for 37.4% of the share value, and 62.6% of the value investors owned in a new share. One share yesterday turned into 0.626 shares and $5.50 in cash today. The stock didn't really pop -- it's just adjusting to the new structure of the company today.

Now what

What may be more notable for long-term investors is that TerraForm Power laid out how it sees its future. A dividend of $0.72 per share is targeted for next year on a payout ratio of 80% to 85% of cash available for distribution, and the expected growth rate of dividends long term is only 5% to 8%. That implies a dividend yield of just 5.4% today, which would be among the lowest in the yieldco industry. But this should be one of the more stable yieldcos now that Brookfield is in charge of its operations.

10 stocks we like better than TerraForm PowerWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and TerraForm Power wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of October 9, 2017

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.