If you have been investing for a while, you’ve likely come across some dividend stocks that look good on paper but fail to deliver real, long-term returns. That’s why you may want to instead focus on well-established companies that not only pay solid dividends but also grow their business and reward patient shareholders over time.
Capital Power (TSX:CPX) could be one such dependable Canadian dividend stock right now. Despite being down about 16% from its recent highs, its business is far from cooling off. In this article, I’ll show why CPX stock’s recent dip could be a golden chance to buy into a reliable and growing dividend stock.
A top Canadian dividend stock to buy in a dip
For a little background, this Edmonton-based firm focuses mainly on power generation through a diverse portfolio of natural gas, renewable energy, and battery storage assets. It owns about 12 gigawatts of generation capacity across 32 facilities in Canada and the United States.
CPX stock is currently trading at $61.99 per share with a market cap of $9.7 billion. At this market price, it offers an attractive annualized dividend yield of 4.5%, which is paid on a quarterly basis.
Smart performance despite market weakness
In the most recent quarter ended September 2025, Capital Power’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) jumped 19% YoY (year over year) and 48% sequentially to $477 million. As a result, its net profit hit $153 million, with adjusted earnings at $0.94 per share, more than doubling from the prior quarter. Though there was a small YoY drop in net profit, this was largely due to a one-time penalty related to a cancelled contract, which has already been absorbed without any major disruption.
Meanwhile, the company generated a healthy $369 million in adjusted funds from operations (AFFO), pushing its nine-month total to $822 million, bringing it well within reach of its full-year guidance.
Locking in new contracts and boosting cash flow
One of the main reasons the recent dip in this top Canadian dividend stock looks more like an opportunity is how effectively the company is building long-term value. In the third quarter, Capital Power secured a 15-year power-purchase agreement for its Midland facility in the U.S., which is expected to generate an additional $140 million in adjusted EBITDA annually from 2030. This could be a strong step toward expanding its recurring cash flows.
During the quarter, the company also brought 170 megawatts (MW) of battery energy storage online in Ontario, with contracts stretching through 2047. These projects are likely to contribute around $35 million in annual EBITDA and advance its shift toward grid-stabilizing assets, which are gaining importance as renewable energy grows.
Long-term expansion well underway
A few days ago, Capital Power unveiled a strategic partnership with Apollo-managed funds, aiming to co-invest up to US$3 billion in U.S. natural gas acquisitions. With this, CPX is expected to contribute US$750 million, taking up to a 50% ownership stake in select assets while also earning management fees. This could significantly accelerate its presence in the fast-growing U.S. merchant power market. Back home in Alberta, Capital Power is also working on a 250 MW electricity supply agreement with a data centre developer.
All of this supports Capital Power’s broader 2030 goals, including a 50% increase in U.S. capacity, 8% to 10% annual growth in AFFO per share, and total shareholder returns of 13% to 15% per year. These strong fundamentals make Capital Power a strong pick for dividend-focused investors looking to hold through the big ups and downs.
