The stock market is being roiled by higher bond yields. Utility stocks have risen in value, and it doesn’t appear that this trend will continue.
As the Federal Reserve boosts borrowing prices to combat inflation, the 10-year Treasury yield has risen to 2.83 percent from 1.51 percent at the end of 2021. It has already started raising interest rates and is anticipated to reduce its bond holdings soon, which is bad news for risky sectors such as industrials, consumer discretionary, and banking, but good news for defensive sectors such as utilities.
Is it wise to invest in Canadian Utilities?
Canadian Utilities Limited, an ATCO company, is a $20 billion diversified global energy infrastructure corporation that provides essential services, service excellence, and innovative business solutions in Utilities (electricity transmission and distribution, natural gas transmission and distribution, and international electricity operations); Energy Infrastructure (electricity generation, energy storage, and industrial water solutions); and Retail Energy (electricity generation, energy storage, and industrial water solutions) (electricity and natural gas retail sales).
Our approximately 4,600 workers are at the heart of our business, carrying on over 50 years of innovation and service excellence in addressing our clients’ challenges, large and small, from massive infrastructure projects to domestic energy distribution.
Track Record of Dividend Growth
For the past 48 years, we’ve increased our common share dividend every year, the longest streak of annual dividend increases of any publicly traded company in Canada. We want dividends to rise in lockstep with our long-term earnings growth, which is based on our regulated and long-term contracted investments.
Growing a High Quality Earnings Base
Canadian Utilities has invested more than $12 billion in regulated activities over the last eight years. In 2019, regulated utility adjusted earnings accounted for 95% of overall adjusted earnings. The underpinning for continued dividend increase is our highly constrained and regulated earnings base.
Future Capital Investment
In the coming years, we will continue to expand our company. Canadian Utilities aims to invest $3.5 billion in Regulated and long-term contractual assets between 2020 and 2022, which will help to maintain our high-quality earnings foundation and cash flows. $3.4 billion of the $3.5 billion budget will be spent on regulated utilities.
Financial Strength
Our current and future prosperity are dependent on our financial strength. It guarantees that we have the financial resources to fund our current and future capital investments. We are committed to preserving our outstanding, investment-grade credit ratings, which will enable us to get money at competitive rates.
What’s the best utility stock to invest in right now?
These six utility stocks pay dividends and have the potential to grow in value:
- American Electric Power Co., Inc. is a company that produces electricity (AEP)
- Duke Energy Corporation is an energy company based in the United States (DUK)
- Consolidated Edison Inc. is a company that owns and operates Consolidated Edison (ED)
- Pinnacle West Capital Corp. is a private equity firm based in Los Angeles, California (PNW)
- NextEra Energy Inc. is a renewable energy company based in the United States (NEE)
What is the largest electric utility company in the United States?
- 57,500 people work for Duke Energy.
- NRG Energy has a workforce of 47,000 people.
- Southern Co has a population of 45,700 people.
- NextEra Energy has a workforce of 42,500 people.
- 38,000 people work for American Electric Power.
- 35,000 people work for the Tennessee Valley Authority.
- Exelon Corporation has a workforce of 34,700 people.
- MidAmerican Energy has a workforce of 34,000 people.
Is the price of utilities too high?
- Due to strong yields, dividend safety, and good visibility combined with increasing energy prices, utilities are currently trading at a premium.
- E.ON And Fortum are two European firms I own – but have reduced my stakes in as they have gotten expensive. In this post, I examine Enel, a company situated in Italy.
- This player is big, and most importantly, he isn’t overvalued. In fact, it’s the polar opposite.
- In this piece, I’ll explain why and what we can do with Enel, if anything.
- Are you looking for some assistance in the market? Members of iREIT on Alpha gain access to exclusive ideas and advice to help them navigate any market. Find Out More
Algonquin Power and Utilities (AQN)
4.27 percent dividend yield
If you read our articles earlier this year on the Dogs of the TSX and the greatest Canadian renewable stocks, you’ll know how enthusiastic we are about this company. This Oakville, Ontario-based company, which is listed on both the Toronto and New York Stock Exchanges, straddles the line between a renewable energy stock and a utility stock.
It’s difficult to better the growth prospects of well-managed renewable assets paired with the consistent cash flow of a traditional electricity/gas company.
However, when it borrows huge sums of money and/or dilutes shares to raise capital, Algonquin must continue to demonstrate that it can manage its acquisitions and “green-the-fleet” plan in locations like Kentucky while maintaining efficiency and profitability in mind. So far, this dividend mainstay has performed admirably.
Brookfield Infrastructure Partners (BIP.UN)
4.11 percent dividend yield
The Brookfield family of businesses comes up frequently in discussions among investors around the world about utility or infrastructure stocks these days. Brookfield Infrastructure Partners (BIP.UN) is such a large and diverse utility company (both in terms of sector and territory) that it could nearly be termed a Utility ETF.
Brookfield’s list of non-owned assets may be shorter than its list of owned assets. There are over 2,000 kilometers of power transmission lines, 19,000 kilometers of natural gas pipelines, 32,000 kilometers of railways, and an increasing number of fiber/data center digital infrastructure among the assets!
For instance, the company recently announced that it would buy half of an electrical smart meter manufacturer based in Australia and New Zealand.
Brookfield has access to economies of scale that no other Canadian utilities stock can match because to its size. However, others have argued that the company’s diversification may make it impossible for it to specialize and develop a competitive advantage in any specific field in the future.
In such a controlled industry, I’m prepared to wager that having a competitive advantage isn’t all that crucial.
Brookfield is a no-brainer when it comes to secure and diversified equities for the long term, with a dividend growth policy that aims to increase dividends by 5-9 percent each year.
Canadian Utilities (CU)
4.52 percent dividend yield
Canadian Utilities will become the country’s first dividend aristocrat in the near future. Given the company’s history of rewarding patient owners, as well as its present strong dividend yield of 4.52 percent, it’s a good bet. Canadian Utilities has established itself as much as any corporation in the Great White North by continually stressing operational excellence!
CU has successfully expanded operations to much of the rest of Canada, Australia, Mexico, and Puerto Rico, thanks to its 70-year history in Western Canada.
Although its current P/E ratio is expensive, and we’re concerned about the impact of increasing interest rates on the capital-intensive sector of utilities investing, CU has continuously demonstrated that quality is worth paying for. We’re willing to let them be proven wrong until they’re proven wrong!
Fortis (FTS)
3.31 percent dividend yield
Investors in Canadian utility stocks have long favored Fortis Inc. Since its inception in 1987, it has simply built a constant worth. Fortis, one of Newfoundland’s largest corporations, has grown from humble beginnings to acquire multiple businesses in order to provide stockholders with an ever-increasing income stream.
Aquila, Terasen Gas, Belize Electricity Limited, CH Energy Group, UNS Energy, and ITC Holdings Corp. are among the notable purchases.
Delivering electricity and natural gas across North America and the Caribbean turns out to be a great strategy to ensure that you are paid on time. People must keep the lights and heat on at all times! It’s difficult to ignore this dividend payer’s long-term success, but the current price is a tough high in an ideal environment.
Emera (EMA)
While Emera has begun to diversify towards renewable energy assets, the great majority of its assets are still focused on electricity and natural gas generation and transport. New Mexico and Florida, Energy, Caribbean, Maine, Nova Scotia, and “Corporate & Other” are the six primary divisions of the corporation.
Emera has the good dividend history required to make this list of the best Canadian utilities companies, but there is a little more risk and reward with this stock in my opinion.
Emera is swiftly becoming a bet on Florida as they phase out coal power and invest in renewables, since the majority of new capital investment plans are being implemented there as the state explodes with new citizens and businesses. If it weren’t for climate change and increasingly devastating weather patterns, that may appear to be a risk-free bet.
For the time being, I’m going to stay away. That isn’t to say Emera isn’t a good company; it’s just that there are other options on this list that I prefer. It’s commonly referred to as a “weaker” Fortis.
Hydro One (H)
3.01 percent dividend yield
Hydro One is virtually a low-risk “energy bond at this time, as one of the largest electrical utilities in North America. This corporation will have a solid semi-monopoly on expanding cash flows as long as people continue to relocate to Ontario and pay their power bills.
Strong regulation, which began in 2015, places a cap on how profitable Hydro One can grow in the long run, but its target payout ratio of 70-80 percent provides income-seeking investors with a reliable long-term dividend stream.
Is Canadian Utilities owned by Atco?
ATCO bought 58.1 percent of Canadian Utilities Limited from International Utilities in Philadelphia, bringing the company back to Canadian ownership. This significant transaction marked a watershed moment for ATCO, as it brought stable and reliable earnings to the company’s balance sheet, as well as a long-term commitment in Alberta.
For the 1988 Olympic Winter Games in Calgary, ATCO provided the stunning natural gas flare atop the Calgary Tower, as well as many important shelter and lodging contracts.
ATCO has been awarded a $114.2 million five-year contract to run and maintain Canada’s North Warning System.
Which utility company in the United States is the best?
As of April 2021, NextEra Energy was the largest electric utility in the United States, with a market value of around 159 billion dollars. Duke Energy, a North Carolina-based electric provider, was rated second at the time, with a market value of roughly 77 billion dollars.