1 TSX Dividend Stock That’s Down 10% – and Looks Worth Buying While It’s There

Canadian equity markets have staged a strong rebound in recent weeks, with the S&P/TSX Composite Index climbing 8.8% from its March lows and now trading just 1.9% below its all-time high. Despite this recovery, a few stocks still offer attractive entry points. One such opportunity is Northland Power (TSX: NPI), which remains down more than 10% from its 52-week high.

Let’s take a closer look at its business outlook, growth prospects, valuation, and dividend profile to assess whether the stock presents a compelling buying opportunity.

NPI’s fourth-quarter performance

Northland Power operates a diversified portfolio of power-generating assets, with an economic interest in approximately 3.5 gigawatts of capacity. The company sells the majority of its output under long-term power purchase agreements (PPAs), which account for about 95% of its revenue. These contracts have a weighted average duration of roughly 14 years, providing strong revenue visibility and supporting stable financial performance.

The company delivered solid fourth-quarter results, with revenue rising 26.4% year over year to $722.8 million. Higher production from offshore wind facilities, contributions from the Oneida energy storage project, and increased demand for dispatchable power from its natural gas assets have supported its topline growth. Improved operating leverage also boosted profitability, with net income surging 92.6% year over year. Excluding one-time items, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) grew 24.8% to $389.5 million.

Northland Power’s free cash flow increased 50.5% to $121.4 million, reflecting stronger operating performance and improved cash generation. The company also ended 2025 with $931 million in available liquidity, positioning it well to fund its upcoming growth initiatives. Let’s now turn to its growth outlook.

NPI’s growth prospects

Amid rising concerns about pollution, global investments are increasingly shifting toward clean energy, creating a favourable backdrop for Northland. Capitalizing on this trend, the company plans to invest $5.8–$6.6 billion over the next five years to expand its portfolio. These investments could increase its power-generating capacity to 7 gigawatts by 2030, implying an annualized growth rate of 16%.

In addition to expansion, Northland Power is focused on improving efficiency and expects to achieve $50 million in annual cost savings starting in 2028.

In the near term, the company has issued solid 2026 guidance, with adjusted EBITDA projected at $1.45–$1.65 billion. At the midpoint, this represents a 23.7% increase from the previous year. However, free cash flow per share could decline to $1.05–$1.25 from $1.46 in 2025. This drop is largely due to the absence of prior-year one-time benefits – such as German tax gains and deferred Spanish debt repayments – along with higher foreign exchange hedging costs, increased interest expenses in its natural gas segment, and lower capitalized interest on hybrid debt in 2026.

Looking further ahead, free cash flow per share could recover to $1.55–$1.75 by 2030, indicating healthy long-term growth. Overall, despite some near-term pressure, Northland Power’s long-term outlook remains strong.

Investors’ takeaway

Despite the recent pullback, Northland Power remains one of the top performers this year, delivering a year-to-date return of over 30%. Its valuation also appears reasonable, with next-12-month (NTM) price-to-sales and price-to-earnings multiples of 2.4 times and 15.9 times, respectively.

Further, the company had cut its monthly dividend payouts by 40% after reporting its third-quarter results last year to help fund growth projects and preserve balance sheet strength. It currently offers a monthly payout of $0.06/share, translating into a forward yield of 3.1%.

Given its solid operational performance, growth pipeline, and reasonable valuation, Northland Power offers an attractive buying opportunity at current levels.

The post 1 TSX Dividend Stock That’s Down 10% – and Looks Worth Buying While It’s There appeared first on The Motley Fool Canada.

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Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.