Dividend stocks can play an important role in long-term wealth creation, as they offer investors the combined benefits of capital appreciation and steady income generation. In addition, reinvesting dividends can significantly enhance long-term returns through compounding.
Meanwhile, Canadian equity markets have staged a strong recovery in recent weeks, with the S&P/TSX Composite Index reaching a new high yesterday and gaining 10.9% year to date. Despite this rebound, several quality dividend stocks continue to trade meaningfully below their recent highs. One such stock is Northland Power (TSX: NPI), which is currently trading at more than an 8% discount to its 52-week high.
Against this backdrop, let’s evaluate Northland Power’s business outlook, growth prospects, dividend yield, and valuation to determine whether the current pullback presents an attractive buying opportunity.
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NPI’s business outlook
NPI develops, owns, and operates a diversified portfolio of energy infrastructure assets, including offshore and onshore wind, solar, battery energy storage, and natural gas power facilities. The company currently holds an economic interest in approximately 3.5 gigawatts of power-generating capacity.
Importantly, Northland Power sells most of the electricity generated from its facilities under long-term power-purchase agreements (PPAs), which account for roughly 95% of its total revenue. These long-term contracts provide stable and predictable cash flows while helping shield the company’s financial performance from market volatility.
The company recently delivered a strong first-quarter performance, with revenue increasing 16.5% year over year to $775 million. Higher production from offshore wind facilities and contributions from the Oneida Energy Storage Facility, which became operational during the second quarter of 2025, drove its sales growth. However, some of these gains were partially offset by lower production from onshore wind and solar facilities across Spain, Canada, and the United States.
Supported by higher revenue, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rose 18.3% year over year to $427.4 million. Meanwhile, free cash flow increased 15.7% year over year to $182 million, reflecting the company’s improving operating performance.
Having reviewed its strong first-quarter results, let’s now examine Northland Power’s long-term growth prospects.
NPI’s growth prospects
Growing awareness of pollution and climate-related challenges is accelerating the global transition toward cleaner energy sources, creating significant long-term growth opportunities for Northland Power. Governments, businesses, and consumers are increasingly investing in renewable energy infrastructure, positioning Northland Power to benefit from this favourable industry trend.
To capitalize on these opportunities, the company plans to invest between $5.8 billion and $6.6 billion through 2030. These investments could expand its power-generation capacity to approximately seven gigawatts, representing an annualized growth rate of nearly 16% through the end of the decade. Alongside these expansion initiatives, NPI focuses on improving operational efficiency and optimizing costs, which management expects could generate approximately $50 million in annualized savings beginning in 2028.
For 2026, management expects adjusted EBITDA to range between $1.45 billion and $1.65 billion, with the midpoint representing roughly 24% growth from the prior year. However, free cash flow per share could decline from $1.46 last year to $1.05-$1.25 this year. The expected decline is primarily due to the absence of one-time benefits recorded last year, including German tax gains and deferred debt repayments in Spain, as well as higher foreign-currency hedging costs, higher interest expenses in the natural gas segment, and lower capitalized interest related to hybrid debt.
Despite this near-term pressure, management expects free cash flow per share to recover to a range of $1.55 to $1.75 by 2030, reflecting improving operating performance and the benefits of ongoing expansion projects. Considering these factors, Northland Power’s long-term growth outlook appears promising.
Investors’ takeaway
Northland Power currently pays a monthly dividend of $0.06 per share, yielding 3.02%. In addition to its consistent monthly payouts, the company has also delivered strong capital appreciation, generating a total shareholder return of 35.6% year to date and outperforming the broader equity markets.
Despite these impressive gains, Northland Power continues to trade at a reasonable valuation, with a next-12-month price-to-earnings multiple of 16.5. Considering its solid operating performance, promising long-term growth prospects, and attractive valuation, I believe the stock remains an excellent buying opportunity for long-term investors.
