A dividend-focused strategy involves purchasing dividend-paying stocks to create extra income or meet liquidity requirements. The primary consideration is dividend consistency, assuming the company is established and financially healthy. However, some investors focus not just on dividend payers but on dividend growers.
Dividend growth stocks are viewed as quality stocks because of the growing payouts to shareholders. The TSX has produced two dividend kings or companies that have raised dividends for at least 50 consecutive years.
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Building a reputation
Capital Power (TSX:CPX) is building a reputation as a dividend powerhouse. You may want to consider adding this growth-oriented independent power producer (IPP) to your investment portfolio. The recently announced 6% dividend hike marked CPX’s 12th consecutive year of dividend increases. At $61.33 per share, the utility stock’s dividend yield is 4.6%.
Capital Power has a growth plan and strategic priorities. The $9.4 billion IPP will pursue acquisitions to expand its flexible generation portfolio. Expansion in the U.S. to meet electricity demand is underway. The combined 5.2 GW flexible generation capacity (Canada and the U.S.) in 2022 will increase to 10.4 GW in 2025.
Straightforward business model
CPX’s power-generating assets are operationally insulated from tariffs. Furthermore, the straightforward business model focuses on generating stable and growing cash flows. The contracts are with A-rated counterparties, and the contracted cash flows provide stability and low-cost capital. Management is negotiating to extend the current contracts.
Capital Power acquired two large natural gas power plants, Hummel Station and Rolling Hills, in June this year, creating a significant presence in this major North American electricity market. The twin acquisition has expanded its presence in the wholesale electricity market in the eastern and midwestern United States (PJM market).
According to its President and CEO, Avik Dey, the Hummel Station and Rolling Hills facilities are strategically positioned as young and highly efficient assets. Both facilities have significant commercial optimization potential, enjoying access to low-cost fuel. He added that the PJM transaction enhances the positioning of Capital Power’s U.S. generation fleet and supports long-term shareholder value creation.
Exciting opportunity
Capital Power owns the Genesee Generating Station in Alberta, Canada. The IPP repowered the thermal power station to transition the province off coal and dramatically reduce carbon emissions. Today, the natural gas combined cycle facility (Genesee Units 1 and 2) can deliver up to 1,857 MW of reliable and cleaner power for the province.
The new opportunity is to power a large-scale data centre at the Genesee Generating Station. Avik Dey believes it is the perfect site to exclusively power a data centre. “Our physical site at Genesee is incredibly advantaged for a large hyper data centre,” he added. The facilities can accommodate the computing firepower or requirements for artificial intelligence and other applications.
Unfortunately, Alberta’s grid operator lacks sufficient electrical connection capacity. The project needs enormous power to run and cool the data centre.
Significant growth potential
Capital Power held steady in the last 12 months (+31.6%). It incurred a $132 million net loss in Q2 2025 compared to the profit of $76 million in Q2 2024. Nonetheless, this dividend growth stock is a buying opportunity. The business fundamentals, including the significant commercial optimization potential of the assets, are growth drivers.
