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By David Berman

With a dividend yield of 5.6%, TransAlta Corp. (NYSE:TAC) is one of those attractive-repellent stocks. Yes, the yield is high, making it tempting for investors who like regular dividend payments. But is the yield so high that the market sees no growth ahead?

Cory O’Krainetz, an analyst at Odlum Brown, believes the stock is attractive at this level, even as earnings remain under pressure. Earlier this week, TranAlta reported earnings of 34 cents a share, up from 32 cents a share last year. Cash flow from operations were relatively unchanged.

The company continues to have some lingering maintenance issues with some of its large coal plants, but downtime and maintenance costs are expected to trend lower in the fourth quarter and into 2010,” the analyst said. “We believe that earnings will continue to improve as plant availability increases and maintenance costs are reduced.”

He maintained a “buy” recommendation with a 12-month price target of $27. The shares traded on Thursday at $20.24, down 1.5%.

The shares have barely budged from their lows in March – relatively speaking – rising just 13% even as the benchmark index has surged nearly 50%, making them look either unloved or undiscovered. (TransAlta shares certainly weren’t dull on the way down though, falling more than 50% from August, 2008, to March of this year, out of concerns about high debt levels.)

One of the reasons for this lack of interest on the way up could be due to the impression that TransAlta just doesn’t have a lot of growth expectations built into the stock, given the nature of its utility-like business.

However, it is getting harder to find a steady, high-yielding stock these days. Even Bank of Montreal (BMO), whose yield rose into the double-digits during the worst of the recent financial crisis, has seen its yield fall to 5.5%.

Source: TransAlta: Does High Yield Signal Slow Growth?