If you’re looking for a great deal on the TSX today, there are some excellent dividend stocks out there. But one thing you might not consider is that a high dividend yield doesn’t necessarily mean a great investment.
That’s why today I’m going to look at one that is. A company that provides excellent dividend income, while still giving you month after month of passive income. What’s more, there’s a lot of potential growth in the future. So let’s get into it.
Northland Power (TSX:NPI) is a renewable energy company that focuses on creating a diversified renewable energy asset portfolio all around the world. It includes energy sources such as hydro power and solar power, but also wind power. It’s this last item that’s been the most exciting for analysts, with the most potential.
That’s especially true considering Northland stock’s offshore wind farms. On land, there really isn’t all that much power that can be generated from wind. However, offshore wind speeds are far higher. This can create immense power sources, which Northland stock has been investing in heavily.
But that heavy investing hasn’t been without issues. Northland stock has had a difficult go the last few years. Rising interest rates and inflation have hit the company hard, along with other companies. The excitement that was once surrounding renewable energy stocks have also diminished. But that could mean an opportunity awaits.
Bad news for now…
This might be bad news for now, but good news for us today. Northland stock has had its own personal problems on top of recent market movement. This includes the need to invest in fixing its wind turbines, a costly endeavour. The uogrades came at the worst time, and caused shares to drop.
However, this could certainly be good news for long-term investors wanting a strong dividend while they wait. After all, Northland stock offers a superior deal in pretty much every sense of the word. The company is a bit behind when it comes to debt, needing 129% of equity to cover its debt at this point. However, in every other respect it’s a strong stock.
Northland stock currently trades at 15.4 times earnings, with a forward price-to-earnings ratio of 19. Therefore, investors think shares will be in higher demand come the future. It still trades at 2.7 times sales, 1.4 times book value, and just 8.3 of enterprise value (EV) over earnings before interest, taxes, depreciation and amortization (EBITDA). All in all, NIP’s a valuable stock, with a great dividend.
About that dividend
A dividend stock isn’t a great dividend stock if that dividend isn’t going to stick around. So that’s where we really care about all these numbers. Earnings, revenue, it all adds up to whether the company can continue to pay its dividend, with a current yield at 5%. That’s quite a bit higher than its five-year average of 3.72% as of writing.
Yet again, Northland stock looks quite healthy. It currently holds a payout ratio of just 76.9%, at the time of writing. The ideal should be between 50% and 80%, putting this in a prime position. And with shares down a whopping 36% in the last year, but up 23% since October, time could be running out for that great yield.
All in all, you could be bringing in substantial passive income from dividends and returns in the next year and beyond. And that could come out once a month. Though I would certainly consider Northland Power a long-term investment to grab hold of for years to come.