A Dividend Powerhouse I’d Buy Over Algonquin Power Stock Right Away

Algonquin power (TSX:AQN) looked like the perfect stock back in 2020, but with focus now on survival, it may be better to look elsewhere.

| More on:
The sun sets behind a power source

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Algonquin Power & Utilities (TSX: AQN) has been through a bit of a rollercoaster ride lately. Over the past year, the stock has taken a dip, down roughly 25%. This left some investors feeling a bit queasy. It’s currently trading around the $9 mark, a far cry from its highs of over $20 back in 2020. The company’s earnings have also been under pressure, with its recent quarterly results showing a decline in both revenue and net income compared to the previous year. It was not exactly the power surge investors were hoping for.

But it’s not all doom and gloom. Algonquin still offers a juicy dividend yield, currently hovering around 6%. This is sure to keep income-focused investors somewhat satisfied, but given recent market moves, it might not be enough, which is why investors may want to look elsewhere.

Why not AQN?

If you’re thinking about investing in Algonquin stock, you might want to hold off for now. The company has recently sold its renewable energy business to LS Power for US$2.5 billion. Now, this sounds like a solid deal on the surface. However, this move is part of a larger strategy to transform into a pure-play regulated utility, and the transition hasn’t been smooth sailing. The company has also slashed its dividend by 40%, which is a clear sign that financial pressures are mounting. While the idea of streamlining operations might pay off in the long run, the short-term outlook is anything but certain.

Created with Highcharts 11.4.3Algonquin Power & Utilities PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Adding to the concerns, Algonquin’s revenue has seen a 5% decline year over year, with the company also reducing capital expenditures to a bare minimum. This belt-tightening indicates that Algonquin is more focused on survival than growth right now. Plus, with ongoing rate case filings and the need to bolster its balance sheet, there’s a lot of uncertainty hanging over this stock. Unless you’re in it for the long haul and have a strong stomach for volatility, Algonquin Power might not be the best choice for your portfolio at the moment.

Consider BEP instead

When it comes to picking a strong renewable energy investment on the TSX, Brookfield Renewable Partners (TSX:BEP.UN) shines a bit brighter than most. In its recent earnings report, Brookfield showed a solid 9% bump in funds from operations (FFO) to $339 million, or $0.51 per unit. Proof that its diverse portfolio is working in its favour.

Created with Highcharts 11.4.3Brookfield Renewable Partners PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Despite reporting a net loss of $154 million, Brookfield continues to invest smartly, deploying $8.6 billion in capital to expand its market-leading reach. This kind of aggressive yet strategic growth is why its 6.02% dividend yield, backed by consistent quarterly distributions, remains a reliable choice for income-focused investors.

However, Brookfield’s strong financial health is complemented by some high-profile deals, like their recent partnership with Westinghouse and Cameco. These ventures not only diversify its income streams. It also positions it to benefit from the rising demand for both renewable and nuclear energy. With a $4.4 billion liquidity cushion and a commitment to growing shareholder value through stable and increasing dividends, Brookfield Renewable Partners is well-equipped to weather economic shifts while delivering consistent returns. For investors looking for a blend of growth and income, BEP.UN offers a more compelling option on the TSX.

Should you invest $1,000 in Algonquin Power and Utilities right now?

Before you buy stock in Algonquin Power and Utilities, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Algonquin Power and Utilities wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 positions in Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners and Cameco. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

concept of real estate evaluation
Dividend Stocks

Canadian Real Estate Stocks: How I’d Navigate This Sector With $15,000 During The Pullback

A $15,000 investment split among these two undervalued Canadian defensive REITs could generate high income yields with capital gains upside

Read more »

A worker gives a business presentation.
Dividend Stocks

2 Canadian Dividend Stocks I’d Buy With $3,000 Whenever They Dip in Price

There's no shortage of great Canadian dividend stocks to buy, but these two pose huge upside right now for income…

Read more »

hand stacks coins
Dividend Stocks

How I’d Invest $20,000 in Canadian Stocks for Lasting Generational Wealth

Long-term investors willing to be patient with their money should have these three TSX stocks to build lasting wealth.

Read more »

four people hold happy emoji masks
Dividend Stocks

The Best Canadian Dividend Stocks to Buy in April 2025

Canadian dividend stocks are some of the best options out there, and these few look like some of the best.

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Use $10,000 to Transform My TFSA Into a Cash-Generating Machine

It may be grim out there, but there are plenty of sky-high dividend yields to choose from on the TSX…

Read more »

Canada day banner background design of flag
Dividend Stocks

Top Canadian Stocks to Buy Right Now With $5,000

Looking for some safe, long-term stocks? These Canadian stocks are where you should look first.

Read more »

Car, EV, electric vehicle
Dividend Stocks

Outlook for Magna Stock in 2025

Magna stock has sunk into the toilet, but it could now be one of the best undervalued stocks out there.

Read more »

alcohol
Dividend Stocks

Why I’d Consider These 3 Blue-Chip Dividend Stocks for a $20,000 Lifelong Investment

In a market correction, it’s essential to focus on blue-chip stocks that offer stability and long-term growth potential.

Read more »