This TSX Dividend Stock Is Down 54% and Worth Holding for Decades

A dividend stock can earn a spot in a portfolio for decades when the business behind that payout stays useful through every kind of market. That usually means steady demand, predictable cash flow, and enough room to grow earnings without taking wild risks. It also helps when management stops chasing flashy ideas and gets back to basics. That’s what makes a beaten-down utility worth a second look.

AQN

Algonquin Power & Utilities (TSX:AQN) is not some tiny speculative operation. Through Liberty, it serves more than one million customer connections, mostly across North America, in electricity, natural gas, water, and wastewater. Regulated utilities tend to have demand that does not disappear just because the economy gets shaky. People still need the lights on, the heat running, and the water flowing. That gives Algonquin stock a sturdier base than many dividend stocks trying to promise decades of income.

The last year has also been a year of real change. In August 2024, Algonquin agreed to sell the majority of its renewables business for up to US$2.5 billion as part of a plan to cut debt. It also moved ahead with the sale of its Atlantica stake, and by early 2025 it had named Rod West as its new chief executive while extending its co-operation agreement with activist investor Starboard. That may sound messy, but the story underneath is actually fairly simple. Algonquin stock has been stripping itself down into a more focused regulated utility.

That shift makes the old Algonquin stock debate look a little outdated. Investors once focused heavily on the renewables angle. Now the case is more about whether a cleaner, less leveraged utility can produce steady earnings growth. The market has not fully decided yet. Shares have recovered over the last 12 months, but they still sit far below the low-to-mid $20 range they touched around 2021.

Into earnings

On earnings, the latest numbers looked much better than the market had seen from Algonquin stock in a while. For full-year 2025, net earnings came in at US$208 million, or US$0.27 per share, while adjusted net earnings were US$258.8 million, or US$0.34 per share. That compared with net earnings of US$54.8 million, or US$0.07 per share, in 2024. Fourth-quarter 2025 net earnings were US$29.4 million, or US$0.04 per share, versus a loss a year earlier. That shows Algonquin stock is finally starting to show that the reset is doing something.

The regulated business did the heavy lifting. Regulated Services Group full-year net earnings rose to US$351 million from US$260.1 million, helped by approved rate increases, better weather versus 2024, and lower interest expense after debt repayment. Management said about US$1.6 billion of net proceeds from the renewables sale went toward paying down debt. It also said operating expense as a percentage of gross revenue improved to 35.8% from 37.7%, while earned return on equity climbed to 6.8% from 5.5%.

Valuation is where the story gets interesting. Algonquin stock recently traded with a forward annual dividend of 4%. The trailing price-to-earnings (P/E) looks high at 92 because reported earnings are still recovering, so Algonquin stock is not a classic cheap stock on that measure. But utilities often get judged more on the stability of future earnings, and management is guiding for adjusted net earnings per share (EPS) of US$0.35 to US$0.37 in 2026 and US$0.38 to US$0.42 in 2027.

Bottom line

Looking ahead, Algonquin stock plans roughly US$3.2 billion in utility capital spending from 2026 through 2028 and expects 5% to 6% annual rate-base growth over that stretch, with no equity issuance expected through 2027. That is the kind of roadmap that can support a hold-forever case. Especially with solid income from even a $7,000 investment.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTAQN$8.90786$0.36$282.96Quarterly$6,995.40

The risk, of course, is that Algonquin stock still needs to prove it can keep regulators happy, grow without overreaching, and avoid another strategic wobble. But after years of disappointment, this looks more like a utility finally growing up. For investors who want a dividend stock they can tuck away and revisit years from now, Algonquin stock looks worth holding onto.

The post This TSX Dividend Stock Is Down 54% and Worth Holding for Decades 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.