Northland Power Stock: Buy, Sell, or Hold?

This monthly dividend provider has been a major winner in the recent past, but the question remains as to whether more is on the way.

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It can be hard to find a stock that offers both growth as well as monthly dividend income, and yet that’s exactly what’s been on offer from Northland Power (TSX:NPI). Shares of NPI stock are up 14% in the last month, popping skyward after strong earnings. Yet the question is whether this can last — especially with a 5.15% dividend yield on the line.

Buy

First, let’s consider the company’s recent strong financial performance, which sent shares up. Northland Power’s revenue for the first quarter of 2024 surged to $755 million, marking a substantial increase from $622 million in the same period of 2023. This robust revenue growth is primarily attributed to higher wind resources across its offshore wind facilities and the contribution from the New York onshore wind projects.

What’s more, the company’s gross profit and net income also witnessed significant growth, reflecting operational efficiency and effective cost management. Gross profit increased to $697 million from $569 million, while net income surged to $149 million from $107 million in the first quarter of 2023.

More growth is on the way as well. Northland Power is actively engaged in the development and construction of several large-scale renewable energy projects, including offshore wind projects in Taiwan and Poland and an energy storage project in Canada. These projects are expected to significantly enhance the company’s generating and storage capacity, further bolstering its revenue and profitability in the coming years — all while continuing strategic partnerships.

Sell

However, there have been a few issues on hand. The departure of Mike Crawley, the president and chief executive officer, might introduce uncertainty into the company’s future direction. Leadership changes can sometimes lead to shifts in strategy or delays in decision-making, which could affect investor confidence.

And despite recent movement, Northland operates in the energy sector, which can be prone to volatility. Fluctuations in commodity prices, regulatory changes, or geopolitical tensions could impact the company’s profitability and stock performance. This would include recent growth strategies, which depend on the success of these major projects.

And while renewable energy is a growing sector, Northland’s focus on this area could expose it to risks. These are associated with regulatory changes, government subsidies, and technological advancements. Shifts in government policies or changes in market conditions could affect the company’s revenue and profitability.

Hold

With that in mind, it could be better just to hold the stock for now. Northland Power stock, after all, certainly has enough going for it to offer strength, at least in the short term. The company’s performance was driven by higher wind resources across its offshore wind facilities and contributions from newly operational projects like the New York onshore wind projects. This indicates a healthy revenue stream and profitability, which could make the stock attractive to investors.

Furthermore, despite the leadership change, Northland Power reaffirmed its financial outlook for 2024. Its expected adjusted earnings before interest, taxes, depreciation, and amortization and adjusted free cash flow per share remain unchanged. This consistency in financial guidance suggests stability and confidence in the company’s future performance.

While there are some risks associated with Northland stock, the company looks well-positioned in the coming year. With strong finances, more growth, and more projects on deck, it could be a good time to hold the monthly dividend stock.

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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