Algonquin Power’s aggressive acquisition strategy is paying off, says Cantor Fitzgerald

Cantor Fitzgerald analyst John Safrance says Algonquin Power’s (Algonquin Power Stock Quote, Chart, News: TSX:AQN) aggressive acquisition strategy is paying off.

Last Thursday, after market, Algonquin Power reported its Q1, 2013 numbers. The company reported adjusted earnings of $17.8-million on revenue of $196.7-million, more than tripling last year’s $63.4-million topline.

Safrance says the performance of recently acquired wind assets in the United States bolstered Algonquin’s quarterly EBITDA past his expectations. He also notes that the company reported about $7-million in net incremental adjusted EBITDA related to production tax credits that were above-and-beyond his original forecast. In a research update to clients this morning, Safrance maintained his BUY rating on Algonquin Power, but raised his one year price target by a quarter, to $9.

Oakville-based Algonquin Power was formed as an income fund in September, 1997. The fund was formed to buy hydro facilities in Ontario, Québec, New Hampshire and New York. After the Canadian government decided to change the favourable tax laws for income trusts in 2009,the entity to a corporation. Algonquin now owns a direct or indirect equity interest in 20 hydroelectric generating facilities, 5 wind energy facilities, and 7 thermal energy facilities.

Safrance notes that with most of Algonquin Power’s pending utility acquisitions having closed within this quarter, the board raised the company’s dividend by three cents, to $.34 annually. While this increase still leaves the company’s dividend is at the low-end of his expectations, he says the company’s Adjusted Funds From Operations Payout Ratio should trend lower than the current 50%, which should leave room for future dividend hikes.