Yahoo Finance Consider This Before Buying Algonquin Power & Utilities Corp. (TSE:AQN) For The 4.7% Dividend
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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Algonquin Power & Utilities Corp. (TSE:AQN) has paid a dividend to shareholders. It currently yields 4.7%. Does Algonquin Power & Utilities tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Algonquin Power & Utilities
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Does it pay an annual yield higher than 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Algonquin Power & Utilities pass our checks?
AQN currently pays out twice what it is earning, according to its trailing twelve-month data, which suggests that the dividend is not well-covered by earnings by any means. In the near future, analysts are predicting a more sensible payout ratio of 93% which, assuming the share price stays the same, leads to a dividend yield of around 6.0%. Moreover, EPS should increase to $0.58, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although AQN’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Algonquin Power & Utilities produces a yield of 4.7%, which is high for Integrated Utilities stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into Algonquin Power & Utilities’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three relevant aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for AQN’s future growth? Take a look at our free research report of analyst consensus for AQN’s outlook.
Historical Performance: What has AQN’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
