Atlantic Power (AT) owns and operates power generation and infrastructure across the United States and Canada. Its business model sounds safe and low-risk — sell electricity to utilities or industrial customers under long-term contracts, akin to a utility service.
To start the year, Atlantic Power paid a nice dividend — about a 10% yield, since it paid a dime a month in dividends and traded around $12 a share.
But if you thought Atlantic Power was a low-risk utility, think again. The company slashed its dividend from 10 cents a month to 3.33 cents in March, mostly because the company continues to operate in the red, and shares imploded as a result.
Analysts have been getting increasingly bearish as revenue continues to tumble and loss estimates grow ever higher. Atlantic Power has sold part of its business, including its interest in the Path 15 transmission project and a joint venture that includes mega-utility Duke Energy (DUK), but even that influx of cash and assumption of debt might not be enough to turn Atlantic around.
The result is a crash-and-burn akin to a momentum stock running out of gas, not a utility stock hitting a rough patch. Atlantic investors have been hurt big-time in 2013.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.