It’s a difficult time to figure out which dividend stocks to buy. Even if you want passive income, it can be hard to look to the future if you’re struggling with the present.
But today, I certainly urge you to do that in the case of dividend stocks like this one. While it’s struggling now, long-term holders will almost certainly be rewarded. So let’s look at why you might want to consider buying TransAlta Renewables (TSX: RNW) today.
Future outlook is strong
To really understand why TransAlta stock is a good buy today, you need to consider what’s coming. That’s the transition to renewable energy – this company’s focus, as its name implies. However, in the case of TransAlta stock, you get a benefit early on.
TransAlta is part of the renewable gas sector. So while there is a transition towards other forms of renewable energy, this company is already well positioned for the transition towards renewable gas.
Yet in the future, when the world moves away from oil and gas, the company is also lining itself up with other options. Because of this, it’s a smart choice among dividend stocks to buy now, and hold for decades.
But it’s cheap
Here’s the thing, present circumstances have pushed TransAlta stock lower. Analysts continue to favour the renewable power sector because of the potential for growth, outright performance, and attractive valuations.
The transition marks TransAlta stock as a strong choice, but near-term results aren’t as good as analysts hoped for. This has led to a drop in price targets, leading to shares coming down.
During the last quarter, TransAlta stock reported a decrease of $7 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) compared to 2021 levels. There were issues at a few of its stations, causing revenue to come in lower. Further, free cash flow came in lower by $29 million with higher tax expenses. In short, TransAlta brought in slightly less cash, but higher inflation and taxes led to lower income.
Get dividend stocks for cheap
Until things level out, it’s now one of the dividend stocks offering a deal for long-term buyers. Shares are down 30% in the last year, falling 25% at the end of December as the company announced a lower expected outlook.
Yet that means now you can pick up TransAlta stock with a higher-than-normal 8.2% dividend yield! Shares have already come up by 12% since the drop in December, so it’s a great time to pick up this cheap stock for long-term income while you can.
