If I had $7,000 of tax-free contribution room in my Tax-Free Savings Account (TFSA), I wouldn’t hesitate: I’d put it all into Northland Power (TSX:NPI). With a high yield, reliable income, and major growth catalysts on the horizon, this renewable utility stock could be an ideal long-term TFSA holding — especially for investors looking to blend income with upside.
Right now, the stock trades at $22.92 and appears to be coiling for a breakout. If it firmly clears the $23 resistance, the next target could be $26. With analysts calling $26.89 fair value, that’s a potential upside of nearly 17%, excluding returns from dividends.
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Monthly income you can count on
Northland Power currently yields a healthy 5.2%, paid out in monthly dividends. On a $7,000 investment, that would translate into approximately $364 per year in tax-free income, or about $30 each month. For passive-income seekers, that’s a compelling reason to own the stock — especially inside a TFSA, where none of the dividends are taxed.
The dividend looks secure, too. In the trailing 12 months, Northland paid out just 26% of its free cash flow and 80% of its earnings — a manageable and sustainable level. The company has also either maintained or increased its dividend every year since at least 2013.
A global clean energy player with room to run
Founded in 1987, Northland Power operates 3.4 gigawatts (GW) of electricity generation capacity globally, with a focus on offshore and onshore wind and other renewable technologies. What sets it apart is the quality and predictability of its cash flow: over 90% of its revenue is under long-term contracts, with an average life of around 15 years. That translates to dependable cash flows — key for supporting stable dividends.
But the real opportunity lies in its future growth. The company is advancing several major clean energy projects:
- Oneida Energy Storage (69% ownership): A 250 MW battery storage facility in Ontario that’s set to begin commercial operations this year, ahead of schedule and on budget.
- Baltic Power (49% ownership): A 1.1 GW offshore wind project in Poland.
- Hai Long (30.6% ownership): A 1 GW offshore wind farm in Taiwan.
These projects are expected to begin generating revenue over the next two years. As they move into commercial operation, they should give Northland a significant boost in free cash flow, potentially triggering a re-rating of the stock.
What could go wrong?
Like any infrastructure-heavy business, Northland carries execution risk — especially with international projects like Baltic Power and Hai Long. Delays or cost overruns could impact cash flow. The company also has a long-term debt-to-capital ratio of about 54%, which seems high but manageable. Importantly, it still maintains an investment-grade credit rating of BBB from S&P, signalling overall financial strength.
Final thoughts: Why I’d go all in
For a TFSA investor looking to earn tax-free monthly income with growth potential, Northland Power checks all the boxes. Between a 5.2% yield, strong project pipeline, and proven track record, this is the kind of dividend stock that could deliver solid returns over the next couple of years.
It’s not flashy — but that’s exactly what makes it powerful. In a market full of hype, Northland Power offers something different: predictability, income, and upside potential.
That’s why I’d confidently put my entire $7,000 TFSA contribution into this stock today.
