1 Magnificent TSX Dividend Stock Down 37% to Buy and Hold Forever

This dividend stock has fallen significantly from poor results, but zoom in and there are some major improvements happening.

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When it comes to the market these days, Canadian investors continue to seek out dividend stocks that are due to recover. That’s a great strategy, if you’re able to identify the right stock. Luckily, there is certainly one magnificent dividend stock that is currently down 37% from 52-week highs. And with some positive signs that more growth is coming.

NPI stock

The dividend stock investors may want to consider these days is Northland Power (TSX:NPI). The renewable energy provider has been seen by investors as a strong long-term hold for a variety of reasons. First and foremost, the company has a stable revenue stream as a leading global developer, owner, and operator of sustainable infrastructure assets.

These assets are quite diverse, ranging from wind and solar to hydroelectric power across North America. The productive assets have long-term contracts providing stable revenue for the company. NPI stock is then able to use that cash to grow its operations, as well as fund its superb dividend.

And there is the potential for even more growth among shares, the company, the dividend, all of it! That mainly comes from the growing renewable energy sector, with more global emphasis on the need for reducing carbon emissions. NPI stock is therefore ahead of the curve, creating more opportunities and enhancing shareholder value.

Not that there aren’t issues

I’m not going to of course state there are no problems for NPI stock. After all, the company is down 37% for a reason. Part of this decline is due to the infrastructure environment itself, where changes in government policies, regulations, and incentives in renewable energy could impact NPI stock.

Furthermore, NPI stock depends on its ability to successfully develop, construct, and operate new renewable projects. Delays and higher costs, including higher interest rates, have proven to already affect the company’s executive.

This can lead the company to run up its debt, creating financing risks. And that risk could increase as NPI stock continues to expand in one area of renewable energy over the other. After all, it’s likely we’ll mainly see a focus on a small handful of renewable energy assets in the future, leaving NPI’s other investments obsolete.

Near-term considerations

There are many what-ifs for NPI stock, but a lot of opportunities as well. So it’s important to assess how the company has performed over the last to see whether there has been positive momentum, or more issues to worry about.

In the case of NPI stock, concerns arose in the second quarter as sales, gross profit, and net income all decreased year over year. This continued for the third and fourth quarter as well. In fact, a net loss was reported in the fourth quarter, compared to net income the year before.

However, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted free cash flow per share, and free cash flow per share improved compared to the year before. Furthermore, metrics are increasing on a quarter-over-quarter basis.

Sales increased from $472 million in the second quarter, to $513 million in the third and $626 million in the fourth. Gross profit was $427 million in the second, $458 million in the third, and $566 million in the fourth. Finally, adjusted EBITDA fell to $232 million in the second, but has increased to $267 million in the third and $389 million in the fourth.

Bottom line

While NPI stock certainly has more growth to achieve to reach its former levels, there is certainly momentum underway. This would therefore be a great time to pick up the dividend stock with this momentum, and grab a 5.3% dividend yield while you’re at it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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