Investors seeking growth opportunities should seek out the renewable energy sector. Yet there are many renewable energy stocks that also provide a dividend. Among them all, though, there is one dividend stock with a high 7% yield that is worth consideration today.
A decade of movement
TransAlta Renewables (TSX: RNW) has come a long way since its incorporation in 2013. This company owns, develops, and operates renewable and natural gas power generation facilities across Canada, the United States, and Australia. With a diverse portfolio of 50 renewable power generation facilities, including wind, hydro, and gas, TransAlta Renewables has positioned itself as a significant player in the renewable energy market. In this article, we’ll delve into the reasons why TransAlta stock is an excellent option for growth-focused investors.
However, the clean energy provider faced a significant challenge in the past when the Alberta Market Surveillance Administrator (MSA) filed an application alleging price manipulation during electricity outages in 2010 and 2011. Despite disputes, TransAlta eventually settled the matter in 2015, paying a total of $56 million and discontinuing its court appeal.
To address concerns about compliance, TransAlta stock initiated two independent, third-party reviews of its procedures. These reviews, conducted by McCarthy Tétrault and PricewaterhouseCoopers LLP, were released to the public, including recommendations for improvement. These actions demonstrate TransAlta’s commitment to transparency and adherence to regulations.
Recent moves
TransAlta stock’s recent strategic moves suggest a strong investment outlook. Notably, TransAlta stock, the parent company, has entered into an agreement to acquire all outstanding common shares of TransAlta Renewables stock, pending shareholder approval. This indicates a vote of confidence from the parent company in the subsidiary’s future prospects.
Additionally, the Kent Hills rehabilitation program is making substantial progress, with 27 turbines fully reassembled and commissioned. The Northern Goldfields Solar project is entering its commissioning phase, with commercial operations expected in the second half of 2023. The Mount Keith 132kV expansion project is also advancing well, set to become operational later this year. These developments underline TransAlta’s commitment to expanding its renewable energy infrastructure.
Earnings growth potential
While TransAlta Renewables stock faces challenges in 2023, such as decreased renewable energy production and lower environmental credit sales, it is important to consider the broader context. These challenges are largely attributed to factors beyond the company’s control, such as lower wind and water resources. Moreover, the sale of certain hydro facilities in late 2022 also contributed to the decline in energy production.
Despite these challenges, TransAlta Renewables stock maintains its resilience. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) decreased in the first half of 2023. This was primarily due to lower energy production and higher operational expenses. However, the company’s net earnings attributable to common shareholders increased by $4 million during the same period, partly driven by asset impairment reversals and lower depreciation.
Cash flow from operating activities exhibited some fluctuations, but a $13 million increase in the three months ended June 30, 2023 demonstrates the company’s ability to effectively manage its finances. Overall, TransAlta Renewables stock is navigating challenges while maintaining its profitability and financial stability.
The bottom line
TransAlta Renewabless stock presents a compelling investment opportunity in the renewable energy sector. Despite historical challenges related to regulatory compliance, the company has taken significant steps to address these issues and improve transparency. And with a dividend yield at 7%, it’s certainly worth consideration.
Recent moves, including the acquisition agreement with TransAlta stock and progress in renewable energy projects, indicate a positive outlook for the company’s growth potential. While the company faces short-term challenges, its ability to adapt and strong financial position make it a solid long-term investment choice.
In a rapidly evolving renewable energy landscape, TransAlta Renewables stock stands as a promising player, poised to capitalize on the transition to cleaner energy sources. Investors seeking growth and sustainability in their portfolios should consider adding TransAlta stock to their list of potential investments.
