Is Innergex Renewables (TSE:INE) The Renewable Energy Stock To Buy?

While earnings growth is spotty, analysts expect the company to grow revenue by the mid-teens over the next couple of years.

Canadian Dividend Aristocrat/All-Star

Another aspect of the company that might get overlooked, is that it is a reliable dividend growth company. Innergex achieved Canadian Dividend Aristocrat/All-Star status a couple of years ago and has a seven-year dividend growth streak.

The company won’t blow you away with high dividend growth rates, but it has managed to grow the dividend by the low-single digits. Since the company has generated negative earnings, the payout ratio against earnings is nil. Looking forward, it is a hefty 225% based on next year’s estimates.

Is the dividend at risk? I wouldn’t necessarily go out on a limb and say with 100% certainty that its safe. According to the company’s latest presentation, the dividend climbed to 124% of free cash flow. In fact, it has increased every TTM since 2018. 

The company also has a number of construction projects in the works and has a pretty high debt load. While the debt is not all that surprising given the industry in which it operates, the payout ratios definitely pose a red flag.

Worth noting, Innergex is on tap to raise dividends at the end of February. The lack of a raise might be a signal that the company’s financial position is a little stretched. While the dividend growth streak is a bonus many of its peers have chosen dividend stability overgrowth.

In fact, Innergex is the only pure-play renewable power generation company that has grown the dividend for more than five consecutive years aside from Brookfield Renewable Partners (TSX:BEP.UN, BEP). It might be time for the company to follow suit with its peers and prioritize dividend stability vs dividend growth.

All things considered, Innergex has an attractive profile and multiple avenues for growth. Just don’t get too attached to that dividend.

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Disclosure: The writer of this article may have positions in the securities mentioned in this article. The fact they hold positions in securities has had no impact on the production of this ...

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