One of the main appeals of dividend investing is the stability of the whole strategy. Dividend stocks tend to offer nice potential total returns with less volatility than the market as a whole.
Algonquin Power & Utilities Corp (TSX:AQN)(NYSE:AQN) is the perfect example. Shares are up 10.42% annually over the last decade -- including reinvested dividends -- which handily beats the return of the TSX Composite. In addition, Algonquin has a beta of 0.35, which makes it only 35% as volatile as the index.
Market-beating returns along with less volatility? What’s not to like?
Thanks to its recent acquisition of Liberty Utilities, Algonquin has become much more than just a power operator. It now has 262,500 power customers, 337,000 natural gas customers, and 182,500 water customers in the United States alone, as well as the Canadian power generation division.
Growth won’t be a problem, either. The company recently announced it was spending $2.4 billion U.S. to acquire Empire District Electric Company. It also plans to spend an additional $6 billion on other projects. Together, these moves should increase EBITDA from approximately $500 million in 2016 to close to $1.4 billion by 2021.
Algonquin also offers great dividend-growth potential. Management has a stated goal of increasing the dividend by 10% per year. In the last five years, it has easily accomplished this; the dividend has more than doubled from seven cents per share each quarter to 15 cents. The current yield is 4.8% and the payout ratio is sound.
