This Dividend Powerhouse Just Got More Attractive

Of all the dividend stocks currently available on the Toronto Stock Exchange (TSX), Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) has been a top pick of mine for some time now due to the company's impressive track record of delivering earnings growth and returning value to shareholders in the form of dividend distributions which have grown significantly over time.

Over the past four years, Algonquin Power has displayed some pretty impressive results, growing net earnings from $15 million in 2012 to $131 million in fiscal year 2016. The utilities company has done this by growing its asset base over time and utilizing key assets more efficiently over time, expanding operating cash flow from $63 million to $287 million over the same time frame.

Although the business has been operating at a free cash flow deficit for some time due to Algonquin Power's increased capital investment spending, these capital investments are expected to result in large increases in FCF moving forward, making this company an attractive play at current levels.

With a valuation multiple that may seem rich at current levels (price to earnings ratio around 39 times earnings), Algonquin Power is actually trading at a slight discount to its peers when considering price to book value or price to sales metrics.

The utilities sector tends to demand slightly higher valuation multiples than its peers partly due to the fact that the revenues and profits are much more predictable and stable than those of other industries, adding a level of safety to this sector which is relatively unseen in the broader market.