Down 60%, This Dividend Stock is a Buy and Hold Forever

On the surface, buying a dividend stock when it’s down can be quite scary. Yet a dividend stock can earn “buy and hold forever” status even when the share price is down if the business still prints steady cash flow, the dividend remains sustainable, and management has a track record of protecting the balance sheet.

Investors want a company with essential demand, pricing power, and a payout that leaves room for reinvestment, not a dividend that forces it to borrow just to keep up appearances. Even better, a dividend stock on the recovery is an ideal option. Which is why today we’re looking at Algonquin Power & Utilities (TSX:AQN).

AQN

AQN shares are still down 60% in the last five years, but zoom in and the picture has changed. In the last year, shares have risen over 30% as the company continues its recovery strategy.

The dividend stock is a regulated utility business at its core, with electric, gas, and water utility operations primarily run through Liberty. Regulated utilities can earn predictable returns on a growing rate base, and that can support long-term dividends when the company executes well. In recent years, Algonquin also went through a major repositioning to simplify the story and focus more heavily on the regulated side.

The dividend stock has appeared “down” for a lot of investors because it remains far below its early-2021 peak. The all-time high in Canada sat around the low-to-mid $20s in February 2021, and the shares have traded closer to the high single digits recently, even after a rebound. That gap is the emotional hangover a lot of people still feel when they look at AQN.

Into earnings

The more hopeful part is what the dividend stock has been doing lately and what the numbers have started to show. In its third quarter 2025 results, Algonquin reported improved year-over-year performance on key metrics, including adjusted net earnings of US$71.7 million and adjusted earnings per share (EPS) of US$0.09, up from US$0.08 a year earlier. For a utility trying to rebuild confidence, steady improvement is exactly the vibe you want.

Algonquin also completed the divestment of its large-scale renewables business in January 2025 and has leaned into becoming more of a pure-play regulated utility. The utility has also been pointing to debt repayment and financing improvements tied to asset-sale proceeds, which is a big deal for a name that got punished when rates rose.

Looking ahead

So why is AQN down so much from its highs? The blunt answer is leverage plus higher rates, mixed execution, and a dividend that had to reset. In August 2024, Algonquin cut its dividend sharply, and the market treated that as a trust event, not just a math adjustment. Add the asset-sale headlines and strategic overhaul, and you get a dividend stock that investors stopped treating like a sleepy utility and started treating like a turnaround.

But could it now become a true buy-and-hold-forever income stock? It has a path, but it needs to keep earning it. The bull case is that the dividend reset has already happened, the business looks more regulated and predictable than before, and recent results show year-over-year improvements while the dividend stock keeps the dividend steady at US$0.065 per share for the quarter. If Algonquin keeps winning rate approvals, grows its rate base, and continues reducing financial strain, long-term income investors could eventually see a more “normal” utility story again.

Bottom line

The risks remain real, though. Utilities still live and die by regulation, interest rates still matter when debt is high, and another misstep would hit confidence fast. If you’re looking at AQN as a long-term passive-income play while it’s still well below its old peak, the smart approach is to treat it like a quality-improving turnaround, not a guaranteed forever stock on day one. For now, here’s what $7,000 could bring in for investors.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL ANNUAL PAYOUTFREQUENCYTOTAL INVESTMENTAQN$8.48825$0.37$305.25Quarterly$6,996.00

Watch dividend coverage, debt trends, and regulatory progress like a hawk, and size it like a position that must prove itself over the next few quarters. If it keeps stacking boring wins, that’s when “forever” starts to feel deserved.

The post Down 60%, This Dividend Stock is a Buy and Hold Forever appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe 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.