The great thing for long-term income investors is the number of great dividend-paying companies on the TSX right now. That said, some are simply better than others. In this article, I’m going to highlight why I think Algonquin Power & Utilities Corp. (TSX:AQN) is one of the best for investors with a long-term investing time horizon.
Algonquin’s current dividend yield of 3.6% is great. However, some investors may be seeking a higher initial yield. I think the company’s dividend is more attractive than it might be at first glance for a couple reasons. First, the company’s dividend growth rate is likely to remain in the mid to high-single digits long-term. This provides investors with growing income needs in retirement a great place to park some cash right now.
Secondly, Algonquin has one of the best growth profiles of its utilities peers. Around two-thirds of the company’s revenue is derived from regulated utilities. This business provides steady and stable cash flow growth over time, and should not be underestimated in terms of its importance to long-term investors.
However, the other one-third is where I think investors should get interested. The company’s renewable power segment has grown to become a cash flow generating machine, and I think will continue to improve over the long-term. As governments and companies demand higher renewable energy to meet sustainability targets, companies like Algonquin will continue to reap the benefits.
This is a company with an excellent yield, but also excellent long-term growth potential. Accordingly, I think investors can plan on a double-digit total return with this stock over the long-term.
Invest wisely, my friends.
