Utility companies are known for their resilient dividend payouts. Their rate-regulated assets generate predictable earnings to support consistent dividend payments. Within this sector, investors can consider the Canadian utility company Algonquin Power and Utilities (NYSE:AQN)(TSE:AQN), the parent company of Liberty Utilities. AQN has consistently paid and raised its dividends. Further, it offers a high yield of 6.48% at current price levels. Also, AQN has an Outperform Smart Score on TipRanks.
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Here’s Why AQN Is a Solid Dividend Stock
AQN’s rate-regulated business and long-term power purchase agreements in the renewable segment add stability to its payouts. AQN has paid and raised its quarterly dividends for 12 years in a row. Further, its dividends have grown at a CAGR of 10% during that period.
Through its $12.4 billion, Algonquin Power expects to expand its rate base (value of assets on which it earns a specified rate), drive earnings, and grow its dividends. At its investor day, Algonquin Power announced that it expects the rate base to increase at a CAGR of 14.6% through 2026. Meanwhile, its adjusted EPS will grow at a CAGR of 7% to 9% during the same period.
Its growing earnings will support higher dividend payments. Moreover, AQN’s management is confident that its payout ratio of 80-90% of normalized earnings is sustainable in the long term.
Is AQN a Good Stock to Buy?
On TipRanks, AQN stock is a Moderate Buy based on three Buy, two hold, and one Sell recommendations. Meanwhile, the analysts’ average price target of $13.90 implies 25.68% upside potential over the next 12 months.
TipRanks’ data shows that 2.3% of investors increased their holdings in AQN stock last month. Further, it has a Smart Score of nine out of 10, implying an Outperform outlook.
Bottom Line
Algonquin Power and Utilities’ low-risk business, solid dividend payment history, growing rate base, and visibility over earnings growth make it a solid dividend stock for the long term. Further, its high yield and reliable payouts could help investors earn a worry-free passive income.
