The Best Stocks with Monthly Dividends: TransAlta Renewables

07/02/2020 5:00 am EST


Ben Reynolds

CEO, Sure Dividend

Ben Reynolds, editor of Sure Dividend continues a 5-article countdown of his favorite monthly dividend payers. TransAlta Renewables (Toronto: RNW) (OTC (TRSWF) is number 2 on his list.

Monthly dividend stocks are securities that pay a dividend every month instead of quarterly or annually. More frequent dividend payments mean a smoother income stream for investors.

Our top monthly dividend stocks were selected based on their projected total annual returns over the next five years, but also based on a qualitative assessment of business model strength, future growth potential, and dividend sustainability.

Read about monthly dividend payer #5 — STAG Industrial

Read about monthly dividend payer #4 — Main Street Capital

Read about monthly dividend payer #3 — Shaw Communications

Our second favorite idea among monthly dividend payers is TransAlta Renewables (Toronto: RNW) (OTC (TRSWF). Its history in renewable power generation goes back more than 100 years. In 2013, the company was spun off from TransAlta, who remains a major shareholder in the alternative power generation company.

The company has maintained or increased its dividend every year since 2014, by an average of 4% growth per year. Its portfolio consists of ~44 facilities powered by wind, natural gas, hydro, or solar. It generates about 43% of cash flow from natural gas (half from Canada and half from Australia) and 51% from wind.

MoneyShow Canada Virtual Event on July 8-9

TransAlta earns a place on the list of top monthly dividend stocks, not just because of its high yield, but also because of its future growth potential. TransAlta stands on the forefront of a major growth theme–renewable energy.

2019 was another year of growth for the company. Full year Comparable EBITDA increased $8 million, to $438 million for 2019, mainly due to the inclusion of a full year of results from the Lakeswind wind farm and the Mass Solar facility. Future growth is likely due to the addition of new projects. For example, TransAlta announced that the Big Level and the Antrim wind farms began commercial operation in December 2019.

The company also has performed well to start 2020, especially given the difficult business conditions due to coronavirus. Adjusted funds from operations of $94 million was in line with 2019. The company’s U.S. wind and solar operations outperformed during the quarter. On a per-share basis, adjusted FFO and cash available for distributions each dropped 3% year-over-year.

TransAlta pays a monthly dividend of $0.0783 per share in Canadian dollars. In terms of U.S. dollars, the annualized dividend payout of $0.67 per share represents a strong yield of 6.3%. TransAlta is therefore an appealing mix of dividend yield and future growth potential. The dividend appears secure, as the company has a strong financial position.

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