When dividend stocks drop in price it is an opportunity to lock in a higher yield since the payment per share now represents a higher percentage of the stock’s price.
TransAlta Renewables Inc (TSX:RNW) saw its stock price decline nearly 5% in the last couple days of trading as the company released its quarterly financials which failed to impress investors. Although the company saw revenues more than double from the prior year, foreign exchange losses and impairment expenses sent the otherwise strong quarter into the negative.
In the past six months the stock has dropped 14% in value and as a result the dividend yield is now over 7%. TransAlta Renewables has a growing dividend and the company hiked its payouts by 6.8% earlier this year.
The one danger that always concerns investors with dividend stocks is that a struggling stock may inevitably see its payout reduced, or even eliminated entirely. However, that’s not always the case, and stocks can often go on dips for a variety of different reasons.
Although TransAlta Renewables did not have a strong quarter, the company still has a bright future and could very well bounce back next quarter. TransAlta Renewables is in an emerging industry and although there is a lot of long-term potential for renewable energy, there can be short-term pain that happens before then.
The stock is a great option to buy and hold for many years as investors will be able to benefit not only from long-term capital appreciation but increasing dividend income over the years as well.
