I get it. Oil and gas are still such an enormous part of our economy, not just in Canada but around the world, and I’m not going to deny that. But I am going to tell you one true fact, and that’s that the world not only needs to shift to renewable energy, but the shift has already begun.
That’s why this could become one of the best opportunities since the shift from coal to oil and gas. But how do you find clean investments already showing strength not just recently but for decades? These are the best shots at ultimate long-term returns. Which is why today we’re going to look at one powerful player, Northland Power (TSX:NPI).
A powerful investment
NPI is a renewable power producer proving that not only is it strong, it’s growing. This performance has been seen over the last several quarters, with the recent second quarter no different. During the second quarter, revenue came in at $509 million, with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at $245 million. There was a net loss of $53 million, driven by lower wind and fair-value losses.
Furthermore, free cash flow came in at $58 million and the dividend stock has $1 billion available in cash. This helps support an ample monthly dividend at $1.20 annually. Its growth pipeline also supports future growth and income, with 3.5 gigawatts currently operating, with 2.2 GW under construction and 9GW in early-to-mid development. Therefore, there is meaningful scale for the energy transition.
What’s more, the clean power producer has an outstanding track record. Its Oneida project came online ahead of schedule and under budget. It holds a diversified asset mix of offshore wind, onshore wind, battery storage, and utility exposure. Management now expects adjusted EBITDA of $1.2 to $1.3 billion and FCF of $1.15 to $1.35 for 2025. This was revised downwards after wind shortfalls, but is impressive nonetheless.
What to watch
All that said, no investment is perfect, and NPI is included. The dividend stock does see its wind resource as being volatile, though it’s a big driver. The dividend stock has said offshore wind underperformed the second quarter, showing there is variability that can swing widely. Plus, 50% of its adjusted EBITDA comes from certain offshore assets, so if there’s poor wind, it hits results hard.
Furthermore, the second quarter large fair value losses can create swings in generally accepted accounting principles (GAAP) and affect investor sentiment. Add in large scheduled facility payments and finance costs that reduce near-term free cash, and debt seems to be climbing faster than it’s coming down.
Overall, investors will need to watch several things over the next few years. First, the performance of Hai Long and Baltic Power in terms of timing, costs, and production metrics. FCF per share versus guidance needs to be sustainable to support that great monthly dividend. And of course persistent low wind could be a huge red flag.
Bottom line
There is a bullish case for the next decade for NPI if it remains consistent from its current and future projects. However, if low wind continues, or costs rise, this could put pressure on the dividend. For now, this is what investors could earn from a $7,000 investment today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| NPI | $22.96 | 305 | $1.20 | $366 | Monthly | $7,008 |
All together, there is a moderate to strong long-term upside from this dividend stock. Especially with favourable winds. Yet overall, it’s a strong clean-energy dividend stock with a meaningful development pipeline. While it’s not about to surge in share price, it could soar if held in a long-term portfolio.
