Buy Capital Power for gains and income

Capital Power’s earnings continue to grow along with its electricity generation capacity. With a payout ratio of 45 to 55 per cent, its dividends will keep growing too.


Capital Power generates electricity from a variety of fuel sources including coal, solar, wind, natural gas, landfill gas, waste heat and solid fuel.

One of the electric utilities stocks that we regularly review on The Back Page is Edmonton-based Capital Power Corp. (TSX—CPX).

Capital Power describes itself “as growth-oriented North American power producer. . . . The company develops, acquires, owns, and operates power generation facilities using a variety of energy sources. Capital Power owns nearly 6,000 megawatts (MW) of power generation capacity at 26 facilities across North America. Approximately 900 MW of owned generation capacity is in advanced development in Alberta and Illinois.

Its earnings per share are growing briskly

This year, Capital Power is expected to earn $1.65 a share. This would represent healthy earnings growth of nearly 38 per cent from $1.20 a share last year. In 2020, the company’s earnings are expected to advance by 19.4 per cent, to $1.97 a share. Growing earnings should attract investors seeking to profit from share price gains.

What’s more, Capital Power is raising its dividends regularly. On October 31, for instance, it will begin to pay yearly dividends of $1.92 a share. That’s up by 7.3 per cent from its former annual dividend payments of $1.79 a share. President and chief executive officer Brian Vaasjo said that this “is consistent with our 7% annual dividend growth guidance to 2021”.

Both earnings and dividends will grow

We expect Capital Power to succeed in increasing its dividends over the next couple of years. That’s because it plans to pay out dividends between 45 per cent and 55 per cent of its adjusted funds from operation. As the company’s earnings grow, so will its ability to keep on raising its dividends. Growing dividends will attract income-seeking investors who should bid up the price of the shares.

Capital Power remains a buy for further long-term share price gains as well as attractive and growing dividends. Just make sure that you buy the shares gradually. That way, you can profit from what’s known as ‘dollar-cost averaging’. That is, invest fixed sums at regular intervals and you’ll buy more shares when prices are lower and fewer shares when prices are higher. That way you accumulate the shares at an appealing average price.

This is an edited version of an article that was originally published for subscribers in the September 27, 2019, issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.

The Investment Reporter, MPL Communications Inc.
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