When interest rates rise, income investors get nervous. Bond yields start to look more attractive, and many dividend stocks lose their shine. But that’s exactly when I look for stable businesses that offer a strong yield with the potential for long-term growth. One dividend stock that checks all those boxes right now is Capital Power (TSX:CPX). If I had $10,000 to invest before bond yields spike again, this is where I’d put it.
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About Capital Power
Capital Power is a utility company based in Edmonton that owns and operates power generation facilities across North America. It has about 7,500 megawatts of power capacity either in operation or under construction. These assets are spread across thermal and renewable sources, giving the company a balanced and diversified profile. That’s a big plus when you want steady performance in a changing economic environment.
The dividend stock has been quietly beating expectations. As of writing, Capital Power is up around 40% in the last year, significantly outpacing the broader TSX index. It’s not hard to see why. The dividend stock continues to grow its portfolio, maintain solid margins, and deliver cash to shareholders, all while investing in the future.
Into earnings
In the first quarter of 2025, Capital Power posted revenue of $988 million, a notable improvement from the same time last year. Net income came in at $116 million, or $0.88 per diluted share. This was an increase from $114 million, or $0.84 per share, in the first quarter of 2024. The dividend stock also reaffirmed its guidance for the full year, suggesting confidence in its ability to weather economic uncertainty and potential rate changes. Operating cash flow remains strong, and so does its commitment to capital discipline.
One of the main reasons to buy Capital Power now is its dividend. The dividend stock currently offers a yield around 4.6%, which is paid out quarterly. That’s much higher than the average dividend on the TSX and provides a steady stream of income. And because the dividend stock operates in a regulated and highly necessary industry of electricity, there’s strong visibility into future earnings. Power demand isn’t going away, and Capital Power is right in the middle of meeting that need. Right now, a $10,000 investment could bring in $464 in annual income!
| COMPANY | RECENT PRICE | SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CPX | $55.95 | 178 | $2.61 | $464.58 | Quarterly | $9,962.10 |
More to come
Utilities like Capital Power tend to perform well in uncertain markets because they’re considered defensive stocks. People still need heat, light, and electricity no matter what’s happening with interest rates or inflation. But this utility also brings growth to the table. The dividend stock is investing heavily in renewable energy, with several wind and solar projects either in progress or recently completed. That gives it a long-term growth angle many traditional utilities don’t have.
There are, of course, risks. If bond yields surge quickly, investors might flee dividend stocks for safer government bonds. And if energy prices fall or demand weakens, earnings could take a hit. But Capital Power has shown it can navigate these changes. It uses hedging contracts to smooth out revenue, and maintains a mix of regulated and merchant assets that help reduce volatility.
Another key point is that the company is not overloaded with debt. While utilities often carry higher debt loads, Capital Power’s financial position remains manageable. It maintains investment-grade credit ratings and has a clear plan to fund its future growth. That includes disciplined capital spending and a focus on maintaining the dividend.
Bottom line
So why act before bond yields rise? Because once they do, opportunities like this may get more expensive. Investors will start chasing safe dividend income again, and dividend stocks like Capital Power could see share prices move higher. By getting in now, you can lock in a higher yield and set yourself up for long-term income and capital appreciation.
If I had $10,000 to put to work before yields rise, Capital Power would be my choice. It’s a smart balance of income, growth, and stability in a sector that isn’t going out of style anytime soon.
