The Canadian Dividend Stock I’d Turn to First When Markets Start Getting Difficult

When markets get rough, investors usually learn fast. The best dividend stock isn’t always the one with the biggest yield. It’s the one that can keep paying when confidence fades, headlines sour, and share prices swing. That’s why Capital Power (TSX:CPX) could deserve a top spot on a difficult-market watchlist.

CPX

Capital Power owns and operates power-generation assets across North America. Its portfolio includes natural gas, renewables, battery storage, and other flexible generation assets. That mix gives it a practical role in today’s market. Canada and the United States need more electricity, not less. Data centres, electrification, industrial growth, and grid reliability all point in the same direction. Power demand looks like a long-term story, even if the stock market has a bad year.

In the first quarter of 2026, Capital Power stock delivered adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $404 million, up $37 million from last year. Yet adjusted funds from operations (FFO) fell to $154 million from $218 million a year earlier. Net income also looked thin, with basic earnings of $0.04 per share. So this isn’t a case where every number screams “buy.”

Still, difficult markets reward cash flow and visibility. Capital Power stock reaffirmed its 2026 guidance, including adjusted EBITDA of $1.565 billion to $1.765 billion and adjusted FFO of $890 million to $1 billion. It also said about three-quarters of 2026 cash flow was already secured through contracts or hedges. That gives investors more certainty than they would get from many cyclical dividend stocks.

Looking ahead

The dividend helps the case. Capital Power stock declared a quarterly common share dividend of $0.69 for the first quarter, giving it an annual yield of 4.1% at writing. That won’t make investors rich overnight, but in a rough market, a reasonable yield backed by contracted power assets can feel far better than a flashy payout with weak support.

The growth plan adds another layer. Capital Power stock wants to grow adjusted FFO per share by 8% to 10% annually through 2030. It also aims to grow in the United States, where power demand from data centres and grid reliability needs could create more opportunity. If management delivers, investors could collect income and still participate in growth.

That said, this isn’t a risk-free utility. Capital Power stock operates in power generation, which can bring commodity exposure, contracting risk, construction risk, and regulatory pressure. Higher debt costs can also hurt, especially when companies need capital to build or buy assets. And after a strong run in the share price, investors should avoid treating it like an automatic bargain.

Bottom line

That’s why I’d turn to it first, but still with a price in mind. A market downturn could give long-term investors a better entry point into a business tied to one of the strongest infrastructure themes in North America: reliable electricity. The dividend offers cash while investors wait, which can be a lot with an even $7,000 investment.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTCPX$68.69101$2.76$278.76Quarterly$6,937.69

For Canadians building a dividend portfolio, Capital Power stock brings a useful mix. It offers income, exposure to rising power demand, and a business that should matter even when the economy slows.

The post The Canadian Dividend Stock I’d Turn to First When Markets Start Getting Difficult appeared first on The Motley Fool Canada.

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More reading

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• 3 Canadian Dividend Stocks Perfect for Retirees
• 3 Dividend Stocks I’d Consider Adding More of This Very Moment
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• Stocks That Nobody’s Talking About — Until They Explode Higher

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Capital Power. The Motley Fool has a disclosure policy.