Having a secondary or passive source of income is prudent in an uncertain economic environment. It can provide greater financial stability while also helping offset the impact of rising prices. In addition, passive income can help investors achieve their long-term financial goals sooner. Given the relatively low interest rate environment, investors may consider allocating capital to high-quality monthly dividend stocks to generate stable and reliable passive income.
Against this backdrop, let’s assess Northland Power (TSX: NPI), which currently offers a forward dividend yield of about 3.3% and could be an attractive option right now.
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Northland Power’s business outlook
Northland Power owns and operates a diversified portfolio of energy infrastructure assets, consisting of offshore and onshore wind, solar, and natural gas facilities. In total, the company owns or has an economic interest in power-producing facilities with a gross generating capacity of approximately 3.5 gigawatts. Notably, around 95% of its revenue comes from long-term power purchase agreements (PPAs), with a weighted-average contract duration of about 14 years, providing stable, predictable cash flows.
Meanwhile, the company recently reported solid fourth-quarter results, with revenue rising 26.4% year over year to $722.8 million, driven by strong performance from both its International and Americas segments. Supported by this revenue growth, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased 24.8% to $389.5 million.
Northland Power also generated $227.2 million in cash from operations, while free cash flow reached $121.4 million, representing a 50.5% increase from the same quarter last year. In addition, the company’s financial position remains solid, with $931 million in liquidity at the end of last year, leaving it well-positioned to fund its growth initiatives.
Now, let’s take a closer look at its growth prospects.
Northland Power’s growth prospects
The global transition toward clean energy has created significant long-term growth opportunities for Northland Power. To capitalize on this trend, the company plans to invest approximately $5.8–$6.6 billion over the next five years to expand its power-generating capacity to 7 gigawatts by the end of 2030, implying an annualized growth rate of about 16%. In addition to these expansion plans, management has launched several cost-optimization initiatives that could generate roughly $50 million in annual savings beginning in 2028.
Supported by these initiatives, management expects free cash flow per share to range between $1.55 and $1.75 over the longer term, with the midpoint implying an annualized growth rate of about 2.5%.
For 2026, the company expects adjusted EBITDA in the range of $1.45 billion to $1.65 billion, with the midpoint representing a 23.8% increase from the previous year. However, management anticipates free cash flow per share to decline from $1.46 in 2025 to a range of $1.05–$1.25, driven by several one-time factors.
Moreover, Northland Power maintains a strong development pipeline, with 2.2 gigawatts of projects under construction, 400 megawatts in late-stage development, 2.3 gigawatts in mid-stage development, and 6.5 gigawatts in early-stage development. Therefore, I believe Northland Power’s growth prospects look healthy.
Investors’ takeaway
After reporting its third-quarter results in November, Northland Power reduced its monthly dividend by 40% to $0.06 per share to help fund growth projects and maintain its balance sheet strength. At the same time, the company reported a widening net loss – from $191 million to $456 million – which triggered a sell-off and pushed the stock lower.
Since then, the shares have staged a strong recovery, rising more than 34% from the November lows. However, the stock still trades at about a 17.7% discount to its 52-week high. Its valuation also appears reasonable, with NTM (next 12 months) price-to-sales and price-to-earnings multiples of 2.2 and 10.9, respectively. While the dividend yield is now relatively modest, investors could benefit from potential capital appreciation, making the energy stock an attractive buy at current levels.
