Northland Power Inc (NPI.TO)

An unconventional utility working on clean and renewable energies. About 2/3 of their earnings come from wind and solar power. It is on trend and they own assets in Europe, where there is large decommissioning of dirty energy assets. A sophisticated developer, but has not been a consistent dividend growth story. He believes the dividend is safe. He is warm to the business although does not currently own it. Yield 5.5%.

This chart is stabilizing, but if credit markets continue to deteriorate he would be cautious. If it trades below $20 watch out. Don’t let it trade another 10% lower against your position.

PKI-T vs. NPI-T. PKI-T has come up from a nice level. He was positive on the stock there and continues to be. It is a little rich now but has been a good dividend payer. NPI-T has not done as well recently. It could be interest rates. They are showing good growth and great cash flow. They have great wind farms coming on and it is just a case of whether it is Taiwan or further things in Europe. They need a partner to keep their cost of capital down.

(A Top Pick January 5/17, Down 2%) A lot of their business in offshore wind in Europe. More projects are coming on like Germany in 2020. They're now bidding on offshore wind in Taiwan with results expected in Q3. Raised their dividend last year. A good, little company. He trimmed back at higher prices, but happy to hold it. There's a lot of market bullishness on European offshore wind power, but competition is now heavy, so he doesn't epxect them to do much more bidding in Europe.

Has a fair amount of growth coming, but utilities will get hurt as interest rates rise. NPI was on sale, but didn't get sold, so there was a sell-off right after that. Over three years, it's a solid hold and you will be fine with it. But don't own it for just a year.

He likes the name. It has become a casualty of the rising interest rate environment. They are very utilizers of capital. They are in growth areas. They can earn returns conservatively. This is a very good name and in the right kind of businesses.

For a TFSA? This builds and produces green energy globally. It pays a 4% yield, which is very attractive. However, the keyword is "Power". It is part of the utility group even though it's a little different, and is going to get painted with that brush. You have to remember that 80% of return is buying in the right neighbourhood. If your view is that interest rates are going to stay relatively low and bonds are going to be benign, this would be great. However the signs are pointing to higher rates, a little higher inflation, and you want something with a little more dividend growth as you go along. He would suggest a bank or one of the big, mature software companies. (See Top Picks.)

This went through a strategic review last year, and the company was really saddled between $23 and $24.50, and basically went nowhere for the whole year until the strategic review got sorted out. It now has huge cash flow coming on from these offshore wind projects. They just completed one and another one is very near completion. From there, what do they do with that cash flow? They already increased the dividend by about 10%. You could see a lot more dividend increases, or they are going to chase more projects, or both. Dividend yield of 5.2%. (Analysts' price target is $27.25.)

This has done very, very well building offshore windfarms, particularly in Europe. As these things come on, the dividend should come on. There is a rumour that it is possibly going to be up for sale at some point. Dividend yield of about 5%.

(A Top Pick Jan 5/17. Up 5%.) When he picked this, he felt the company was either going to get taken out or would be increasing their dividend with a strategy. They raised the dividend, and have a good profile of earnings growth over the next couple of years. After that, they are bidding on wind projects in Taiwan, which is a slow process with about 12 months away before a decision is made. He trimmed his positions. Dividend yield of 5%+.

(A Top Pick Nov 30/16, Up 14%) He still likes it. He believes the dividend can grow substantially. He is concerned about the Canadian dollar and that the economy is slowing. The drivers of energy, housing and new legislation are slowing it down. This is a great way to hold assets in northern Europe. These cash flows will continue to grow.

If interest rates stay low, this company will benefit. They has very, very high-quality assets, both in Canada and Europe. Have carved out a nice position as a large offshore wind producer. Bidding on contracts all around the world at the moment. He likes renewable energy in general, as perpetual cash flow is a very interesting thing. Has a nice yield of 4.5%. A good place to be.

Northland Power (NPI-T) or Capital Power (CPX-T)? This one would be viewed as quite a bit purer as there is a lot of wind in there. Moved up a fair bit in 2016 when they put themselves up for sale, and then went sideways when nothing happened. Now you have an expensive stock treading water to catch up with its own fundamentals. He would classify both as in the Hold category, and a little bit lower on the pecking order.

(A Top Pick Nov 30/16. Up 11%.) He still likes this. They are in the electric generation business. A year ago, they were just finishing up the first project. Now they’ve finished the construction of the last turbine, and it should be in full operation by the end of this year. For the next 10-15 years, they’ll just be spinning cash. Thinks they’ll raise the distribution in 2018. A well-run company.

A very innovative management team. The founding shareholder owns about 30% of the company. He would want a much higher price for the sale of the company. It will be hard to maintain the clip of growth in this company. He would not expect it to move up quickly from here. It will be treading water from here. Continue to sit on it and collect the dividend.