Algonquin is still a buy

Article Excerpt

ALGONQUIN POWER & UTILITIES, $9.80, is a buy. The utility (Toronto symbol AQN; Shares o/s: 683.4 million; Market cap: $6.6 billion; TSINetwork Rating: Extra Risk; Yield: 5.9%; www.algonquinpower.com) is down 35% since the company reported lower-than-expected earnings for the third quarter of 2022. Per-share earnings declined 26.7%, to $0.11 from $0.15. That was mostly due to higher interest payments on its floating rate debt. As a result, Algonquin is cutting your quarterly dividend by 40.0% starting with the April 2023 payment. The new annual rate of $0.434 U.S. still yields a high 5.9%—but represents a more sustainable 75% of its earnings compared to 125%. And to further strengthen its balance sheet, Algonquin also plans to sell $1 billion U.S. of its less-important assets. The company expects to earn between $0.55 U.S. and $0.61 U.S. a share in 2023. The stock trades at 12.7 times the midpoint of that range. That’s a reasonable multiple in light of the company’s high-quality assets. Algonquin Power & Utilities is a buy. buy. …