Algonquin Power & Utilities Corp T.AQN

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Gordon PapeGordon Pape • 3rd+ • 3rd+ Acclaimed Author and Editor of Canada’s Most Highly Regarded Investing NewslettersAcclaimed Author and Editor of Canada’s Most Highly Regarded Investing Newsletters 4d •

4 days ago

 

 

 

In the most recent edition of my popular investing newsletter, The Income Investor (TII), I provided an update on Algonquin Power & Utilities Corp., along with my recommended course of action.

Here's my commentary:

Algonquin Power & Utilities (TSX, NYSE: AQN)

Type: Common stock
Current price: C$7.17, US$5.28
Originally recommended: July 28/16 at C$12.45, US$9.45
Annual payout: US$0.26
Yield: 4.9%
Risk: High
Website: algonquinpower.com

Comments: A new Algonquin is starting to take shape. Earlier this month the company announced it is selling its renewable power assets (excluding hydro) to a wholly owned subsidiary of LS Power for total consideration of up to US$2.5 billion.

"This major milestone, coupled with our previously announced agreement to support the sale of our Atlantica shares, delivers on our plan to transform AQN into a pure play regulated utility, optimize our regulated business activities, strengthen our balance sheet, and enhance our quality of earnings," said CEO Chris Huskilson. "We are confident that our path towards a pure play regulated utility supports our objective to create long-term value for our customers and shareholders."

The deal is expected to close in the fourth quarter of this year or the first quarter of 2025.

Algonquin also cut its dividend – again – to what the company says is a more sustainable level. The 40% cut will set the new rate at US$0.065 per quarter (US$0.28 a year), which works out to a divided yield of 5.2% at the current price.

These moves are pushing Algonquin forward toward its goal of being a pure play regulated utility. For investors, that implies less volatility, slower growth, and a dependable dividend.

Second-quarter results showed a decline of 5% in revenue but a significant improvement in earnings attributable to shareholders, which rose to $200.8 million ($0.28 per share) from a loss of $253.2 million (-$0.37 a share) last year. The company reports in US dollars.

ACTION NOW It's been an agonizing couple of years, but if you're still hanging in and content with a slow-growth utility, continue to HOLD. I would not advise new purchases, however.

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