A dividend-focused investment strategy typically revolves around stable, income-generating companies. But while consistent payouts are important, dividend growth is often an even better indicator of long-term financial health and shareholder value. Dividend growers — companies that increase their payouts year after year — tend to be well-managed, financially sound, and positioned for sustainable growth.
The TSX boasts a few elite dividend growers, including two dividend kings with over 50 consecutive years of increases. And while Capital Power (TSX:CPX) isn’t there yet, it’s quickly building a reputation as one of Canada’s most promising dividend growth stocks.
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A Rising Dividend Star
Capital Power, an independent power producer (IPP), recently announced a 6% dividend increase — its 12th consecutive annual raise. That kind of consistency puts it squarely on the radar for long-term income investors. At the time of writing, CPX trades at $61.33 and offers an attractive 4.6% dividend yield.
The company’s strategic focus is clear: growth through acquisition and capacity expansion, particularly in flexible power generation. It’s currently pursuing U.S. expansion to meet rising electricity demand. Between Canada and the U.S., its generation capacity is expected to double from 5.2 GW in 2022 to 10.4 GW by 2025.
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Stable, Scalable, and Strategically Positioned
One of the strengths of Capital Power lies in its straightforward and resilient business model. The company’s long-term power contracts are secured with A-rated counterparties, which brings cash flow stability and supports access to low-cost capital. CPX is also actively renegotiating and extending these contracts to lock in future income.
In June, the company completed the acquisition of two large natural gas facilities — Hummel Station and Rolling Hills — significantly expanding its footprint in the U.S. wholesale electricity market, particularly in the eastern and midwestern regions (PJM market). CEO Avik Dey described the assets as young, efficient, and commercially promising due to their access to low-cost fuel and strategic locations.
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Innovative Growth Projects
Closer to home, Capital Power owns the Genesee Generating Station in Alberta — now a fully repowered natural gas combined-cycle facility, transitioning away from coal and significantly lowering emissions. Genesee Units 1 and 2 now deliver up to 1,857 MW of cleaner, reliable electricity.
The next big opportunity? Powering a large-scale data centre. With rising demand for AI computing power, Capital Power sees Genesee as a prime location to support a major data centre operation. According to Dey, the physical site is ideally suited for such a facility.
However, a current challenge is Alberta’s limited electrical grid connection capacity, which may slow progress on this initiative — at least for now.
Long-Term Potential Despite Short-Term Losses
Despite reporting a $132 million net loss in Q2 2025 (compared to a $76 million profit in Q2 2024), Capital Power’s stock is up over 31% year-over-year. The company’s long-term outlook remains strong thanks to its expanding asset base, robust cash flow potential, and a clear commitment to dividend growth.
Bottom Line
Capital Power offers a compelling mix of yield, growth, and stability — everything income investors should look for in a dividend stock. Its strategic expansion across North America, strong operational base, and track record of annual dividend increases make it a top dividend growth stock to buy now and hold for the long term.
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