One of the most sought-after investments for every portfolio is a juicy dividend stock that pays cash every month. Most income stocks pay out on a quarterly basis, but there are some that provide that more-frequent cadence investors want.
Here’s one such dividend stock that pays cash every month and boasts a yield of over 7%.
The answer lies in renewables
Global warming is now an established truth. As a result, established fossil-fuel burning utilities are being pushed to transition over to renewable energy. This transition comes at a significant cost, often requiring billions and nearly a decade of time.
Enter TransAlta Renewables (TSX:RNW). For those that aren’t aware, TransAlta is a growing renewable energy stock that boasts a presence in Canada, the U.S., and Australia. The company currently boasts a portfolio of 48 facilities, which include a variety of renewable technologies, including solar, wind, hydro and gas.
Why invest in renewable energy stocks?
So then, what makes TransAlta an appealing investment to consider? Part of that comes down to the lucrative business model that TransAlta adheres to.
In short, TransAlta’s facilities are bound by long-term regulated contracts to provide their respective services. In exchange for that service, TransAlta generates a stable and recurring revenue stream.
It’s worth noting that those regulated long-term contracts often span several decades in duration. By way of example, many of TransAlta’s facilities are contracted well into the 2030s, and several well into the 2040s.
This provides some serious defensive appeal to the stock, but also allows the company to invest in growth and pay out a generous dividend.
What about that income?
One of the great things about TransAlta’s dividend is that juicy monthly cadence. Having a stock that pays cash every month can make budgeting easier, and provide some advantage to investors not ready to draw on that income.
As of the time of writing, that yield works out to an insane 7.57%, handily making it one of the higher-paying yields on the market.
In case you’re wondering about that payout, a $30,000 investment will provide an income that’s just shy of $190 every month.
For those investors not ready to draw on that income yet, there’s another advantage to consider. Rather than drawing on that dividend income, reinvesting it until needed allows that eventual payout to grow significantly.
Another key point for prospective investors to consider is value. As of the time of writing, TransAlta trades down over 30% over the trailing 12-month period.
Some of that drop (and by extension, the swelled dividend) can be attributed to the initial wave of interest rate hikes. High interest rates have an effect on capital-intensive businesses such as a renewable energy stock. More importantly though, the stock has surged over 10% year to date.
In other words, the stock remains at a discount, but may not remain that way for very long.
How could you not consider buying?
No stock is ever without risk, and that includes even the most defensive stocks on the market. Fortunately, in the case of TransAlta, the company’s portfolio is well-covered thanks to those long-term regulated contracts. Additionally, the growing need for renewable energy will keep the company high on the must-have list for income investors for years to come.
In my opinion, TransAlta remains a great long-term option that should be part of every well-diversified portfolio.