Renewable power has been a key driver of Algonquin’s recent success while it acquired rate-regulated utilities to build out both areas of its business.
The company is now reviewing its overall asset mix and strategic plans while looking to pay down its considerable debt.
Meanwhile, the stock trades at 12.3 times the company’s 2023 earnings forecast.
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ALGONQUIN POWER & UTILITIES (Toronto symbol AQN; www.algonquinpower.com) has two main businesses: the Regulated Services Group provides regulated electricity, gas, water distribution and wastewater collection services in Canada, the U.S., Chile and Bermuda; and the Renewable Power Group produces electricity from about 47 clean-energy plants in North America.
Algonquin also owns 44.2% of U.K.-based Atlantica Yield plc (Nasdaq symbol AY). That firm operates renewable energy projects in Europe, both North and South America, and Africa.
The company tends to fuel its growth with acquisitions. It cuts the risk of that strategy by focusing on rate-regulated utilities. Those purchases include its $3.4-billion acquisition of Missouri-based power utilities Empire District Electric Company in 2017 (all amounts in U.S. dollars except share price and market cap).
Dividend Stocks: Major corporate moves might be on the way for Algonquin
Algonquin is now conducting a strategic review of its renewable power operations. As well, activist investment firm Starboard Value recently disclosed that it now owns 7.5% of Algonquin. It wants the company to sell those operations.
Algonquin also plans to sell $1 billion of its less-important assets. The move will let it pay down its long-term debt of $7.57 billion U.S. (as of June 30, 2023). That’s a high 1.4 times its market cap. Meanwhile, the stock yields an attractive 6.0%.
Excluding any gains or losses on asset sales, the company will probably earn $0.57 U.S. a share in 2023. The stock trades at a reasonable 12.3 times the estimate.
Recommendation in Canadian Wealth Advisor: Algonquin Power & Utilities Corp. is a buy.
