One dividend stock that hasn’t been getting the attention it deserves lately is Capital Power (TSX: CPX). This Edmonton-based utility company has made major moves in 2025 to strengthen its position as a leading power producer in North America. Despite those achievements, the market has yet to fully reward it, making it an intriguing pick for long-term investors seeking both dividends and growth. So, let’s get into why.
Source: Getty Images
The stock
Utility stocks don’t typically make headlines. But when one goes on a $3 billion acquisition spree, raises its dividend for the 12th straight year, and boosts its annual financial guidance all in one quarter, it’s time to take a closer look.
Capital Power’s second-quarter 2025 results showed solid operational progress. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $322 million, virtually flat year over year. Yet adjusted funds from operations (AFFO) jumped to $235 million, up from $178 million a year earlier. That pushed AFFO per share to $1.55 from $1.37. It also posted a net loss of $131 million, but that was tied to one-time acquisition and financing costs, not an indication of declining core business health.
More to come
In June, CPX completed its largest acquisition ever. CPX acquired two natural gas facilities in the U.S.: Hummel Station in Pennsylvania and Rolling Hills in Ohio. These two facilities added 2.2 gigawatts of flexible generation capacity, bringing the company’s total to approximately 12 GW. The CEO, Avik Dey, called the deal a “milestone” that “supports long-term shareholder value creation,” pointing out that the assets are young, efficient, and strategically located.
The dividend stock revised its 2025 guidance upward, expecting adjusted EBITDA between $1.5 and $1.65 billion and AFFO between $950 million and $1.1 billion. That’s a significant step up from prior targets. Given the current market cap of around $9.2 billion, investors are getting solid cash flow generation at a reasonable valuation.
Even better for dividend seekers, Capital Power increased its dividend by 6%, its 12th consecutive annual hike. The current dividend yield sits at about 4.65%. That’s not the highest yield on the TSX, but when paired with steady dividend growth and a payout ratio of 83.6%, it looks sustainable. Plus, management has shown a clear commitment to returning capital to shareholders, even while pursuing aggressive growth. Right now, a $15,000 investment could bring in $698 annually!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CPX | $59.24 | 253 | $2.76 | $698.28 | Quarterly | $14,987.72 |
Considerations
However, there are reasons the market hasn’t fully bought in. The dividend stock’s recent net loss might spook some investors, even though it’s driven by acquisition costs. Also, Capital Power has taken on significant debt, with a debt-to-equity ratio sitting at 146%. That’s high, and while manageable today, it could pose risks if interest rates remain elevated for longer than expected.
From a valuation standpoint, CPX still looks cheap. Its forward price-to-earnings ratio sits around 21.8, and its price-to-sales ratio is just 2.49. Compare that to some of its peers trading at loftier valuations with slower growth or smaller dividends, and Capital Power starts to stand out.
Bottom line
In short, Capital Power is not just a stable utility stock. It’s a growth story hidden in a defensive wrapper. The market hasn’t fully caught on yet, possibly due to debt concerns and temporary net losses. But with a strong dividend, rising AFFO, expanding footprint, and a clear growth plan, CPX looks like a dividend stock that could quietly outperform over the long run.
