Northland Power Inc. (TSX:NPI) just keeps looking better and better. It’s now trading at a discount of over 50%, making this a high-yield dividend stock that’s about as defensive as they come. Why else might investors consider this staple green energy stock?
Mixed multiples, but deeply discounted — is it good value?
This green power stock has varying multiples, so if you’re looking for value indicators, then be prepared for mixed messages. While its P/E is a little high at 21 times earnings, that still beats the market, and its PEG is a not-too-shabby one times growth. Price-to-book isn’t great, though, at 5.6 times book, so value investors might want to have a think about that.
At $24.59, overall it is good value for money, and that’s one of its biggest draws right now. It’s trading at a +50% discount against its projected future cash flow value of $80.40. With a future growth in annual earnings of 22%, Northland Power is a decent growth stock, and it’s definitely one to pick up if you’re interested in raking in those capital gains down the road.
Northland Power has a low beta of 0.57, which represents considerably lower price volatility than the industry average of 0.73. You’re in truly defensive territory when you see betas this low, so if it’s peace of mind you’re looking for, then you just found it. Where risk does come into play is via debt, so look into that if you’re considering making a purchase.
A strong contender for your TFSA or retirement fund
Offering a dividend yield of 4.88%, which is set to rise to 5.06% next year, Northland Power is a good all-rounder. If you were looking for a truly defensive stock to pad your TFSA or RRSP and you hadn’t considered Northland Power, then now might be the right time to buy this stock. A very healthy 28.2% return on equity over the next three years is further incentive to buy.
With green power looking set to be the resource of the future, you could say that Northland Power’s expected growth is well assured. Factor in its strong European ties, and you have a stock that is fairly well insulated against North American trade fluctuations. From a speculative point of view, Canadian companies like Northland Power may even have an advantage to broker new deals with the U.K. after its divorce from the E.U. next year.
The bottom line
Good value, good growth potential, low volatility, and a decent dividend payer — this is one to stick straight in your TFSA or RRSP and just forget about. What you’re getting with Northland Power is a green energy stock that is both defensive and progressive, which is a fairly rare combination. However, alternative power is going to be one of the biggest growth sectors of the future, which mean that investors looking for passive income and long-term gains have an intelligent pick here.
If a high-yield green power stock with great dividends and a sturdy past performance sounds good to you, consider adding Northland Power to the energy section of your portfolio for a solid defensive play.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.