After hitting an all-time high in January 2025, the TSX Composite Index is facing renewed volatility in February as investors react to economic uncertainty and escalating U.S.-Canada trade tensions. While some stocks are struggling under pressure, others are presenting great long-term buying opportunities, especially dividend-paying stocks that offer stability and reliable income.
One top TSX dividend stock, Capital Power (TSX:CPX), has seen its share price drop 18% so far this year despite maintaining strong fundamentals and a solid long-term outlook. For investors looking to buy and hold for years, this could be a golden opportunity to grab a quality dividend stock at a big bargain. In this article, I’ll highlight why this stock is worth considering right now.
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Capital Power stock
If you don’t know it already, Capital Power is an Edmonton-based firm that mainly focuses on energy generation across North America. In 2024, CPX stock pleased investors by delivering solid 68.4% positive returns. However, after declining sharply so far this year, it currently trades at $53.79 per share with a market cap of $7.4 billion. At this market price, it offers a 4.8% annualized dividend yield.
A lot of this decline can be chalked up to overall market volatility rather than any company-specific weakness. Investors have been jittery about interest rate adjustments and broader economic uncertainty, which has led to selloffs in several sectors, including utilities.
The company’s financial results also suggest that the recent pullback in CPX stock might be more of a buying opportunity than a red flag. In the third quarter of 2024, Capital Power reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $401 million. That’s slightly lower than the $414 million it reported a year ago, but given the overall challenging economic climate, it’s still a strong result. Plus, the company’s adjusted funds from operations came in at $315 million last quarter, reflecting stable cash flow generation, which is a big plus for dividend investors.
Why this stock could be a winner in the long term
One of the main factors that boost Capital Power’s long-term growth outlook is its efforts to grow its presence in the U.S. market. The company’s recent strategic acquisitions, especially the Harquahala and La Paloma facilities, seem to be paying off as its U.S. operations contributed over 50% of its third-quarter adjusted EBITDA for the first time. That’s a major shift, showing how Capital Power is diversifying its revenue streams beyond Canada. During the quarter, the company also achieved a record 11 terawatt-hours of electricity generation, highlighting the strong demand for its assets.
Beyond its strong fundamentals, Capital Power has big plans for the future. It’s pushing forward with key projects like the Genesee Repower One and Two, which are set to be completed soon. These upgrades will make the Genesee site more efficient and environmentally friendly. Given these strong fundamentals, the recent dip in CPX stock could be an opportunity for long-term investors to buy this solid dividend stock at a discount.
