1 of the Smartest Dividend Stocks to Buy With $1,000 in 2023

Down 30% in the last year, TransAlta stock provides long-term holders with a superior dividend yield at a great price.

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 March 9, 2023 12:00 pm EST

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.