Utilities are often synonymous with stability and income, but not all utility stocks are created equal. While most investors gravitate toward the well-known giants of the sector, I’ve been quietly accumulating shares of a lesser-known player that I believe offers a rare blend of income and upside potential: Northland Power (TSX:NPI).
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A battered stock with a resilient core
Let’s address the elephant in the room: 2023 was a rough year for Northland. The stock dropped a staggering 35%, primarily due to surging interest rates and delays in major capital projects. As a capital-intensive renewable energy developer, Northland was hit hard by higher borrowing costs and long lead times on new assets. Unlike traditional utilities with more immediate cash flows, several of Northland’s key projects won’t begin contributing revenue until this year through 2027.
But that doesn’t mean the fundamentals are broken — far from it. The company has weathered the storm by reining in debt and pushing ahead with an ambitious pipeline of clean energy developments. And while others sold in fear, I saw opportunity in the undervaluation.
A high yield with staying power
Today, Northland Power offers a dividend yield of 5.1% based on an annualized payout of $1.20 per share and a current stock price of $23.33. That’s roughly 20% higher than what the benchmark iShares S&P/TSX Capped Utilities Index ETF offers.
The dividend has been remarkably resilient. Since 2012, Northland has either maintained or increased its payout annually — a sign of management’s clear commitment to shareholders, even amid headwinds. Though the dividend hasn’t grown meaningfully in recent years (in part due to share dilution to manage debt), it remains well-supported by the company’s long-term, contracted cash flow base.
With over 90% of revenue under contract — with a weighted average contracted revenue life of about 15 years — Northland has laid a solid foundation for sustainable income. Its current operating capacity of 3.4 GW in renewable assets, particularly offshore and onshore wind, is already generating significant recurring cash flow.
The real growth is yet to come
What excites me most is what’s coming. The company is approaching a major turning point, with several transformative projects set to go live over the next few years. Among them:
- Oneida: A 250 MW battery storage project in Ontario (Northland owns 69%) could be a catalyst for cash flow growth and a valuation rerating.
- Baltic Power: A 1.1 GW offshore wind farm in Poland (Northland owns 49%) expected to begin operations in 2026.
- Hai Long: A 1 GW offshore wind project in Taiwan, where Northland holds a 30.6% stake, is expected to come online in 2026–2027.
These projects are not only massive in scale but also strategically diversified by geography. As they enter commercial operation, Northland’s cash flow could surge — and so too could the stock price. The current consensus target of $27.11 implies 16% upside, with even more potential as the projects near completion.
A smart bet for patient investors
Make no mistake: Northland Power isn’t for the faint of heart. Execution risk is real, and the stock can be volatile. But for long-term investors comfortable with some risk — and especially those seeking monthly income — this dividend stock is worth a closer look.
