Ask Globe Investor: How safe do you think Algonquin Power & Utilities Corp.’s dividend is after the company cut its payout earlier this year? Is the 6-per-cent yield sustainable?As you may recall, I held Algonquin in my model Yield Hog Dividend Growth Portfolio until I sold it last November when a dividend cut seemed likely. A couple of months later, the company slashed its payout by 40 per cent in an effort to cope with the sharp rise in interest rates.
In a recent note, RBC Dominion Securities analyst Nelson Ng estimated that in 2025 – assuming Algonquin sells its renewables business and 42-per-cent stake in Atlantica Sustainable Infrastructure by the end of 2024 – the company will generate about 48 U.S. cents of earnings per share. That would imply an elevated payout ratio of about 90 per cent based on the current annual dividend of 43.4 U.S. cents.
After the resignation of CEO Arun Banskota in August, Algonquin hired board member Christopher Huskilson, a former head of utility Emera Inc. , as interim CEO. Algonquin’s board is currently looking for a permanent replacement.