1 High-Yield Dividend Stock to Own for Lifelong Passive Income

This dividend stock has been a top grower in both share price and passive income over the last few decades. So why wait?

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 20, 2022 4:30 pm EDT

Canadian investors seeking out passive income through a top dividend stock have a few options to consider. A high yield is great, sure. But it’s not so great if that dividend is going to be cut one day. Or if it’s going to stop rising altogether.

So today, I’m going to look at one high-yield dividend stock that ticks all these boxes. This high yielder delivers solid growth in both shares and dividends, and you can look forward to owning it for decades to come.

Utility, wind power — Image source: Getty Images

Algonquin Utilities

Utilities are some of the most stable passive income stocks you can own. And among them Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) is one of the best. Utility stocks like Algonquin provide passive income because it has long-term contracts coming in with solid revenue. This comes from being an energy provider, something we simply will always need.

What’s more is that Algonquin stock has been able to continue to improve its business and also its dividend thanks to its growth strategy. The dividend stock grows its organic business, and uses the cash to increase its dividend, as well as make new acquisitions, then starts the process again. It’s a simple, stable structure that’s led to superior growth for this renewable energy and utility company.

How much growth?

Let’s look at this in a few ways. Algonquin stock has seen shares grow by 523% in the last two decades. That comes to a compound annual growth rate (CAGR) of 9.57% during that time. This is incredible growth from a company that’s in such a stable sector, and what’s more that growth has been linear, beyond the market crashes of the last few decades.

Then there’s its dividend. Algonquin stock has been a solid dividend stock that offers a high yield currently at 5.27%. That passive income has grown higher and higher on a consistent basis over the years. In fact, it’s now a Dividend Aristocrat, raising its dividend for over 25 consecutive years.

And as of writing, that dividend has grown at a CAGR of 12.78% in the last decade. Yes, 12.78%! Back in 2012, you would have received a quarterly dividend of $0.07 per share. Now, that’s jumped to $0.233 per share, with a consistent rise from 2012 to now.

Recent performance

Algonquin stock has been a strong dividend stock because it continues to make strong acquisitions. That includes recent acquisitions contributing to strong results coming in from its second quarter.

The dividend stock increased its revenue by 18% year over year to $624.3 million, with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) up 18% to $289.3 million. Adjusted net earnings were up 19.6% as well to $109.7 million. Management has announced the completion of two projects coming online, as well as a pending acquisition in Kentucky.

Bottom line

Algonquin stock hasn’t slowed down because it hasn’t had to. The company continues to raise its dividend year after year because revenue rises year after year. And it looks like this will continue to be the case for decades to come.