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After Algonquin Power and Utilities Corp. AQN-T announced on Tuesday that it will host an investor call next week, the share price rallied – suggesting that the mere announcement of an announcement was enough to generate interest in the beleaguered stock.

Could clarity on Algonquin’s dividend, which is surely coming, give it another lift?

The Canadian renewable energy company has had a big question mark dangling over it for nearly eight weeks.

After disappointing quarterly results in November and a warning about long-term growth targets, the share price sank to a multiyear low. By late December, it was down as much as 57 per cent from a recent high in April.

The chief concern: With higher interest rates raising the company’s borrowing costs, Algonquin was not generating enough cash to sustain its dividend and its growth aspirations. Either growth or the dividend probably needed a trim.

The soaring dividend yield – which rose above 10 per cent as the share price sank – reflects the widespread view that a distribution cut is necessary.

For investors who once flocked to Algonquin for its combination of attractive renewable energy assets, the stability of a regulated utility and a rising payout, this marked an unfortunate turn. The uncertainty over how severe the dividend cut might be, if it occurs, may have made matters even worse.

But this week’s encouraging 9.6-per-cent gain in the share price offers a glimpse of what might come next: With clarity, the stock could embark upon a recovery, even with a reduced dividend.

Andrew Kuske, an analyst at Credit Suisse, said in a note on Thursday that next week’s investor update “provides the next very visible near-term catalyst for a very interesting stock situation.”

He added: “A path for meaningful value creation exists,” which could include asset sales and a greater emphasis on utilities rather than renewable power generation.

A dividend cut can’t be ruled out either, of course. But there are plenty of examples where downtrodden stocks have recovered after companies slashed their dividends, as a reduced payout brought a sense of relief that the worst was over.

After all, companies tend to cut their dividends as a last resort, reinforcing the argument that these events tend to mark the low point in investor sentiment.

During the COVID-19 lockdowns in 2020, a number of Canadian companies reduced or suspended their dividends in an effort to preserve cash. In most cases, the cuts marked good buying opportunities over the long term.

RioCan Real Estate Investment Trust REI-UN-T announced in December, 2020, that its monthly distribution would be cut by a third beginning in January, 2021. From the announcement to the end of 2021, the unit price rallied by about 30 per cent. RioCan raised its distribution in 2022, but it remains below 2020 levels. (Full disclosure: I own RioCan units.)

CAE Inc. CAE-T, the flight simulation company, saw its share price rebound 68 per cent by the end of 2021, after it suspended its dividend in 2020. Even with the recovery, CAE does not currently pay a dividend.

Suncor Energy Inc. SU-T slashed its dividend by 55 per cent in May, 2020. Though the share price struggled for months after the announcement, it recovered 47 per cent by the end of 2021. The energy producer has since raised its payout several times, to a level that is now higher than it was prior to the 2020 cut.

These companies faced temporary setbacks associated with the pandemic, which isn’t the case with Algonquin.

Complicating matters is the fact that Algonquin struck a deal in 2021 to acquire Kentucky Power Co., which the U.S. Federal Energy Regulatory Commission blocked in mid-December, putting the deal in limbo.

“I don’t know how they are going to adjust their dividend if they don’t know whether they’re going to consummate the Kentucky Power acquisition. Because it may make a big difference,” said Stephen Takacsy, chief executive officer of Montreal-based Lester Asset Management, which sold its shares in Algonquin in 2021 after the deal’s announcement.

So far, the company has said nothing about what is coming next week. In a statement on Tuesday, Algonquin said that its chief executive officer and chief financial officer will provide a business update on Jan. 12.

But if disappointment is already baked into the share price, then some indication of how Algonquin will navigate through the year ahead could push the stock further along its path to recovery. This week, the rising share price suggested that clarity may be worth betting on.