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.
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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.
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.
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.
