When a reliable dividend stock drops in price, it often means one thing for long-term investors: opportunity. That’s exactly what we’re seeing with Capital Power (TSX: CPX) right now. It’s one of those dependable utility stocks that doesn’t make flashy headlines but keeps doing its job quarter after quarter. And after falling about 12% from its 52-week high, it’s looking like a magnificent buy.
Source: Getty Images
About Capital Power
Capital Power is based in Edmonton and generates electricity from a mix of sources, including natural gas, wind, and solar. It operates across North America and has been steadily expanding its reach in both Canada and the U.S. The recent drop in share price isn’t tied to a collapse in its fundamentals; it’s more a reflection of market jitters and sector-wide weakness in utilities as interest rates stay higher for longer. That’s the kind of dip which makes dividend investors take notice.
As of early June 2025, Capital Power trades around $55.50 per share, down from a high of $68.73. At this price, the dividend yield is about 4.6%, which is significantly higher than the TSX average. The company pays $0.6519 per share every quarter, or about $2.61 per year. That kind of income, if reinvested, could compound nicely over time. It’s no wonder investors often refer to utility stocks like this as dividend knights. In fact, a $20,000 investment could create $939.60 in annual income at these prices!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | INVESTMENT TOTAL |
|---|---|---|---|---|---|---|
| CPX.TO | $55.50 | 360 | $2.61 | $939.60 | Quarterly | $19,980 |
Is it stable?
What makes Capital Power different is how it balances stable income with growth. In the most recent earnings report for Q1 2025, it brought in $988 million in revenue. That’s down a bit from the same quarter in 2024, when it reported $1.1 billion. But don’t let that number throw you off. The dividend stock has been restructuring its portfolio and ramping up acquisitions, which sometimes affects short-term figures. Net income was $151 million, or $1.03 per diluted share, down from $205 million last year. But again, digging deeper reveals a healthier picture.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which gives a better sense of ongoing operations, rose to $367 million from $279 million a year ago. Adjusted funds from operations (AFFO) climbed to $218 million from $142 million. That kind of increase shows the core business is actually performing well, even with market noise in the background.
And the growth strategy is very much intact. Earlier this year, Capital Power announced the acquisition of two natural gas-fired facilities in the U.S. PJM market for US$2.2 billion. That added 2.2 GW of generation capacity, which means more long-term revenue and cash flow. These are the kinds of strategic moves that make dividend growth possible.
More to come
In fact, management reaffirmed its guidance of 6% annual dividend growth through 2025. That’s a huge deal. Not only is the dividend yield solid, but the dividend stock baked in future increases. If you’re looking to turn steady income into long-term wealth, those raises add up fast.
Analysts agree the dividend stock looks undervalued. The average 12-month price target is around $63.50, suggesting a potential upside of nearly 13%. That’s before factoring in any dividends. So if you’re reinvesting those payouts, your actual return could be even higher.
There’s always some risk when buying into any stock, even a utility. Interest rates could stay high longer than expected, which tends to weigh on utility valuations. But Capital Power has handled past rate cycles with discipline, managing debt wisely and continuing to invest in future capacity.
Bottom line
For anyone building a passive income portfolio, now is a great time to consider loading up on Capital Power. The dividend stock is down, but the business remains solid. It pays a strong dividend that’s likely to keep rising. And it gives you exposure to both traditional and renewable energy assets, which means diversification within a single investment. It’s not every day you get the chance to buy a dividend knight at a discount. But when you do, it makes sense to take the opportunity and hold on for decades.
