Updated on October 2nd, 2024 by Felix Martinez
Northland Power (NPIFF) has two appealing investment characteristics:
#1: It is offering an above average dividend yield of 5.2%, which is more than double the 1.3% dividend yield of the S&P 500.
#2: It pays dividends monthly instead of quarterly.
Related: List of monthly dividend stocks
You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter, like dividend yield and payout ratio) by clicking on the link below:
Northland Power’s combination of an above-average dividend yield and a monthly dividend makes it appealing to individual investors.
But there’s more to the company than just these factors. Keep reading this article to learn more about Northland Power.
Business Overview
Northland Power is an independent power producer that develops, builds, owns, and operates green power projects in North America, Europe, Latin America, and Asia. The company produces electricity from renewable resources, such as wind, solar, or hydroelectric power, as well as clean-burning natural gas and biomass for sale under power purchase agreements and other revenue arrangements. Northland Power owns or has an economic interest in 3.2 gigawatts of generating capacity. The company was founded in 1987 and is headquartered in Toronto, Canada.
Northland Power greatly benefits from a strong secular trend, namely the shift of the entire world from fossil fuels to clean energy sources. This shift has greatly accelerated since the onset of the coronavirus crisis about three years ago.
The tailwind from this secular trend is clearly reflected in the growth trajectory of Northland Power.
Source: Investor Presentation
The company has expanded from just one country in 2015 to six countries now. During this period, Northland Power has essentially tripled its generating capacity.
Thanks to the essential nature and the high-growth mode of its business, Northland Power proved essentially immune to the coronavirus crisis. In addition, thanks to its ability to pass its increased costs to its customers, the company has proved resilient in the highly inflationary environment prevailing right now.
Growth Prospects
As mentioned above, Northland Power has a major growth driver in place, namely the global shift from fossil fuels to renewable energy sources. This shift has greatly accelerated in the last three years and has decades to run.
It is also important to note that most renewable energy sources had high production costs in the past, and thus, they needed government subsidies to become economically viable. However, thanks to major technological advances, this is not the case anymore. The production cost of solar and wind energy has pronouncedly decreased, and hence, renewable energy sources can easily replace fossil fuels nowadays. To provide a perspective, the cost of solar power has decreased from more than $4 per watt to less than $1 per watt over the last decade.
The primary growth drivers of Northland Power are depicted in the chart below.
Source: Investor Presentation
The company has several growth projects under development right now, with a total capacity of 2.4 GW. As the company’s current generating capacity is only 3.3 GW, it is evident that Northland Power has immense growth potential over the next several years.
Northland Power reported strong financial results for the second quarter of 2024, driven by high wind production from its offshore wind facilities. The company’s sales for the three months ended June 30, 2024, rose to $529 million, up from $472 million in the same period of 2023. Gross profit increased to $483 million, and net income saw a significant jump from $22 million in 2023 to $262 million in 2024. This growth was largely due to improved wind resources, contributions from New York’s new onshore wind projects, and higher demand in the EBSA segment.
In addition to its solid financial performance, Northland Power continues to progress on key development projects. These include offshore wind projects in Taiwan and Poland, as well as an energy storage project in Canada. The successful execution of these projects remains a top priority for the company. Meanwhile, Northland has been actively pursuing other development opportunities across its 9GW pipeline. The company also completed the sale of its interest in the La Lucha Solar Facility in Mexico, further optimizing its portfolio.
Offshore wind energy production rose by 14%, resulting in $241 million in sales for the quarter. Adjusted EBITDA increased by 8% to $131 million, primarily driven by higher wind production across all offshore facilities. However, there were some challenges, including lower revenue from Canadian solar projects due to reduced solar resources and grid outages in Germany. Despite these hurdles, Northland’s overall performance reflects its strong position in the renewable energy sector.
Dividend & Valuation Analysis
Northland Power is currently offering an above average dividend yield of 5.2%, which is more than double the 1.3% yield of the S&P 500. The stock is thus an interesting candidate for income-oriented investors but the latter should be aware that the dividend is affected by the fluctuation of the exchange rate between the Canadian dollar and the USD.
Northland Power has a payout ratio of over 100% but a healthy balance sheet, with a stable BBB credit rating from S&P. Given also the promising growth prospects of Northland Power and its resilience to recessions, its dividend (in CAD) should be considered safe with some risk if earning do not improve.
On the other hand, investors should note that Northland Power has failed to grow its dividend meaningfully over the last decade, primarily due to the devaluation of the Canadian dollar vs. the USD. As a result, it is prudent not to expect meaningful dividend growth going forward.
Final Thoughts
Northland Power is thriving right now, with record earnings in 2022. Even better, the company has ample room to continue growing for decades. Moreover, the stock is offering an above-average dividend yield of 5.2%, with a high payout ratio. It thus combines many positive features, which are suitable, not only for income-oriented investors, but also for growth-oriented investors.
However, investors should be aware that the stock is highly volatile during periods in which its growth decelerates. Therefore, only patient investors, who can ignore short-term pressure and remain focused on the long run, should consider purchasing this stock.
Moreover, Northland Power is characterized by exceptionally low trading volume. This means that it is hard to establish or sell a large position in this stock.
Don’t miss the resources below for more monthly dividend stock investing research.
- The Monthly Dividend Stocks List
- 20 Highest Yielding Monthly Dividend Stocks
- 10 Cheapest Monthly Dividend Stocks
- 10 Safest Monthly Dividend Stocks
- 3 Top ‘Hold Forever’ Monthly Dividend Stocks
And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
- Dividend Kings: 50+ years of rising dividends
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- Dividend Aristocrats: 25+ years of rising dividends and in the S&P 500
- Dividend Achievers: 10+ years of rising dividends and in the NASDAQ
- High Dividend Stocks: 4%+ dividend yields
- Blue Chip Stock: Kings, Aristocrats, and Achievers
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- BDCs: List of BDCs and more