This TSX Dividend Stock Is Down 55% and Still Worth Holding for Decades

AQN’s 55% five-year drop might be less of a warning sign now — and more a second-chance setup after its “back to basics” reset.

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Key Points
  • Algonquin sold most renewables and is trying to become a simpler regulated utility with steadier cash flow.
  • Earnings are still soft, but a lower dividend gives it more room to fund utility upgrades and pay down debt.
  • The big risks are heavy debt, refinancing costs, and execution on rate approvals and cost control.

Big drops can hide second chances. Algonquin Power & Utilities (TSX: AQN) once looked like a dream dividend stock. It owned utilities, renewable power assets, and a fast-growing payout. Then higher rates, too much debt, a dividend cut, and a messy strategic reset knocked the shine off. The stock now trades around 55% below where it sat five years ago. That hurts, certainly, but for patient investors, the new version of Algonquin stock may deserve another look.

Dam of hydroelectric power plant in Canadian Rockies

Source: Getty Images

Today’s AQN

The key word here is “new.” Algonquin no longer looks like the same sprawling growth story that tried to do too much at once. Management sold most of the renewable energy business to LS Power in a deal worth up to US$2.5 billion, while keeping hydro assets. That move changed the pitch. Algonquin stock now wants investors to see a simpler regulated utility with water, gas, and electric operations across North America, Bermuda, and Chile.

That sounds less exciting, but it may suit the next decade better. Regulated utilities don’t usually skyrocket. They earn approved returns on essential assets, invest in infrastructure, and pay dividends from steady cash flow. After the old growth plan cracked, boring might be exactly what this stock needs.

Into earnings

The latest quarter offered a clearer picture. Algonquin reported first-quarter 2026 net earnings of US$83.1 million, or US$0.11 per share. Adjusted net earnings came in at US$99.6 million, or US$0.13 per share. Those figures slipped from last year, so investors shouldn’t pretend the turnaround already looks complete. Still, the company also pointed to its Back to Basics strategy and a regulated capital plan of roughly US$3.2 billion from 2026 through 2028.

Now, Algonquin can grow by upgrading the systems customers already rely on. Water, gas, and electricity don’t disappear from household budgets because the market gets volatile. Over decades, that need can support rate base growth, earnings stability, and a more reliable dividend.

Speaking of the dividend, Algonquin now pays a much smaller one than it did during the boom years. The company declared a quarterly common share dividend of US$0.065 for 2026. Some income investors still won’t forgive the cut, and fair enough. Yet the lower payout gives Algonquin more breathing room as it tackles debt and funds its utility investments. And even now, a $7,000 investment can bring in strong income.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
AQN$8.24849$0.35$297.15Quarterly$6,995.76

Considerations

The balance sheet remains the biggest reason for caution. Algonquin announced new senior unsecured notes in May, including US$650 million due 2031 and US$500 million due 2036. That refinancing helps manage maturities, but it also reminds investors that debt still sits at the centre of the story. Utilities often carry heavy debt, yet higher borrowing costs can pressure earnings and limit flexibility.

There’s also execution risk. Algonquin needs to prove it can run as a focused utility, win rate-case approvals, control costs, and rebuild investor confidence. Activist investor Starboard Value still casts a shadow over the reset, even after trimming its stake. That can help push discipline, but it also underlines how much work the company still faces.

So why hold for decades? Because the hard reset may have already forced the painful decisions. Algonquin cut the dividend, sold assets, narrowed its focus, and brought in new leadership. Investors who buy today don’t own the old promise. They own a cheaper, simpler utility trying to rebuild from a lower base.

Bottom line

All in all, this isn’t a stock for investors who want quick comfort. The next year could still feel choppy. But if Algonquin strengthens its balance sheet and grows its regulated utility base, today’s bruised price could look far more reasonable over time.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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