Best Canadian Utilities ETFs

Utility stocks in the list of high-paying stocks – sounds too good to be true, right? 

These are the most mundane of things, but utilities are critical in today’s economy. Consider what life would be like if you didn’t have access to power, safe drinking water, or garbage pickup. Things would be different – in a rather unpleasant way.

Utility companies have benefited from the high value placed on fundamental customer amenities like electricity and running water. As a result, some utilities are among the most profitable enterprises globally, with consistent income and growth. Utility stocks are popular among investors for a reason. Utility stocks are widely used in portfolios as low-volatility, income-producing, and safe dividend stocks.

5 Canadian Utilities ETFs You Should Invest In

Here are five Canadian utilities exchange-traded funds (ETFs) with a track record of sustained growth and profitability for Canadian investors.

Invesco S&P 500 Equal Weight Index ETF (TSX:EQL)

Invesco Ltd. is a global independent investment decisions management organization dedicated to helping individuals get more out of life via investing. EQL aims to replicate the performance of the S&P 500® Equal Weight Index, or any successor to it, on an unhedged basis in the case of unhedged units or on a hedged basis in the case of hedged units, to the extent reasonably achievable and before fees and expenses (management fees). This Invesco ETF invests mainly in equity securities of corporations listed in the United States, either directly or indirectly.

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As of December 31, 2021, Invesco managed US$1.6 trillion in assets under management on behalf of clients around the world, with offices in more than 20 countries. This ETF promises a current dividend yield of 1.393% and pays quarterly cash dividends of 0.109 CAD (Canadian Dollar) per share.

Trading at a stock price of $30.01 as of March 24, 2022 (2:10 PM), this Canadian utilities company has immense growth potential and shows impressive performance. In addition, the P/E ratio of 18.70 further cements the possibility of significant returns on investment.

Utilities Select Sector SPDR (NASDAQ:XLU)

The goal of the investment is to produce investment outcomes that, before fees and expenses, are usually comparable to the price and yield performance of publicly traded equity securities of businesses in the Utilities Select Sector Index. The fund uses a replication technique to try to match the index’s performance. It typically invests a large portion of its total assets in the securities that make up the index. Electric utilities, water utilities, multi-utilities, independent power and renewable electricity providers, and gas utilities are represented in the index. 

XLU is the largest ETF in terms of assets, with $10 billion assets under management. The Utilities Select Sector Index is XLU’s goal benchmark. It has many of the same holdings as VPU and other utilities ETFs, but with only 28 holdings, as it is a non-diversified fund. 

Trading at $71.52 as of March 24, 2022 (2:22 PM), the future prospects for this are promising. It is undoubtedly an excellent option with a market capitalization of 14,352,215,924 and a P/E ratio of 24.30.

iShares Global Utilities ETF (NASDAQ:JXI)

The investment aspires to replicate the performance of the S&P Worldwide 1200 Utilities (Sector) Capped IndexTM, which is made up of global utility stocks. Accordingly, the fund will typically invest at least 80% of its assets in the index’s component securities and investments with economic characteristics that are substantially identical to the index’s component securities, with up to 20% of its assets in certain futures, options, and swap contracts, as well as cash and cash equivalents.
JXI invests in various countries, including the United States, the United Kingdom, Germany, France, and others. This product will appeal to investors who believe there are better prospects abroad but still want to be exposed to a strong segment of the US economy.

Trading at share prices of $62.66 as of March 24, 2022 (2:35 PM), this ETF has the best prospects compared to other utility stocks, making it the best time to invest in it. In addition, its optimum P/E ratio of 21.60 speaks for the profitability of this utility stock.

Fidelity MSCI Utilities Index (NASDAQ:FUTY)

The Fidelity MSCI Utilities Index ETF (FUTY) tracks an index of utility equities in the United States, a sector with moderate equity volatility and strong dividend yields. A fund like FUTY can help you gain exposure to a low-risk category that can help you boost your existing returns. FUTY, like most sector ETFs, appeals to portfolio managers that use a sector rotation approach. The majority of long-term buy-and-hold investors will most likely gain utility exposure through broad-based equities funds (though the allocation to this sector can be relatively small).
Their investment process intends to generate investment returns that are usually consistent with the performance of the MSCI USA IMI Utilities 25/50 Index before fees and expenses. At least 80% of the fund’s assets under management are invested in equity securities that are part of the underlying index. As a result, it offers an 0.08 percent expense ratio or $8 for every $10,000 invested. 

Trading at a stock price of $46.07 as of March 24, 2022 (2:26 PM) is an excellent option for long-term stock market success. FUTY presently has a market capitalization of 1,276,139,000, and its P/E ratio stands at 23.40.

Algonquin Power & Utilities Corp. (TSX:AQN)

Algonquin Power & Utilities Corp is a generation, transmission, and distribution company in North America. Algonquin Power owns and operates regulated water, natural gas, and electricity distribution utilities in the United States as part of its distribution group. This division generates the majority of the company’s revenue, with natural gas distribution accounting for the majority of that revenue.

Algonquin Power is a renewable energy company that sells electricity generated by its energy facilities, including hydroelectric, wind, solar, and thermal power plants, through its generation group. The majority of Algonquin’s generation revenue comes from its wind farms. Finally, the transmission business of the corporation is responsible for the construction and investment in natural gas pipelines and electric transmission systems.

Algonquin is set to pay a record cash dividend of USD 0.1706 (Canadian Dollar 0.2161) on April 14, 2022, for the period from January 1, 2022, to March 31, 2022. Trading at a stock price of $19.07 as of March 23, 2022 (2:03 PM), the company is a stock market hit. The market capitalization of 12,847,175,773 speaks for the value of this stock.

Why You Should Invest in Utilities ETF in Canada

 There are three clear reasons to invest in Canadian utility stocks. To begin with, many utilities are a need in today’s environment, and the demand for these businesses will only expand in theory as our population continues to grow. Second, utility businesses are known for their low equity volatility and high dividend yields, which provide investors with a consistent income stream regardless of Canadian market conditions; a great alternative for monthly income funds. Finally, these businesses may prove to be recession-proof; irrespective of the state of the economy and economic growth, people still need to utilize power and other utilities to go about their everyday lives.

These reasons make utility stocks a sustainable and stable investment while simultaneously helping you diversify your portfolio with ETFs having impressive performance.

The Bottom Line

Utilities ETFs can be an excellent method to diversify a portfolio with income-producing stocks. In a low market cycle, the utility sector is viewed as defensive and thus a good hold. Despite being a generally stable growth investment, it may not be suited for you. But if you’re interested in high-risk, high-reward stocks, this might be your poison.

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Best Utility ETFs Canada

Several readers have asked me about my views on dividend ETFs and Which Canadian dividend ETFs are available on the market today? As well, why did I ultimately choose to hold individual dividend shares instead of relying on a Canadian dividend ETF?

If you are looking for a solid yield and low-cost combination, VPU is excellent. The Call Utilities ETF, which I covered in my previous post on the Canadian Dividend ETF market, is one of the best options available to any investor.

Invesco’s Canadian Dividend Index ETF aims to replicate the performance of the Canadian Utilities Index (CDZ) as far as possible without fees or charges. The CDs ETF’s objective is to combine the long-term capital growth potential of the Canadian utility sector with a dividend yield of 2.5% and a price-to-earnings ratio of 0.01. The Canadian Dividend Index Utility D (CUT) aims for long-term capital growth by replicating the returns of Canadian utility stocks with an average annual dividend yield of 1.7%.

The BMO Canadian Dividend ETF offers a yield-weighted portfolio of stocks that pay Canadian dividends. You can find out more about this exchange-traded fund on its website here. ETFs will trade from March 5, 2021, in the same language as official filings with the US Securities and Exchange Commission.

BMO has been offering ETFs to track this sector for some time: ZUT is an equal-weighted ETF – utility ETF, ZQQ is a Canadian dollar-hedged ETF that tracks the Nasdaq 100 ZUH is the Canadian dollar hedging US health fund. Vanguard also offers a variety of ETFs, including the Vanguard Canadian Utilities ETF and the VIX Canadian Fixed Income Fund. Canadian fixed income portfolio consists of federal and provincial corporate bonds, focusing on utilities, energy, real estate, and financial services.

If you would like to invest in several Canadian providers but do not have the capital to buy them individually, try this ETF. ETF invests in 16 Canadian utilities, including Canadian Natural Gas, Canadian Power Generation and Canadian Hydroelectric Power.

If you have a genuine aversion to financial and energy stocks and are willing to pay more, the broad Canadian equity ETF is the best choice. ETFs of Canadian banks are great; I think it’s much better to hold individual Canadian bank stocks than rely on one sector – unique ETFs. In this case, you could buy a basket ETF that effectively replicates the TSX in industries you don’t want. Still, you can add sector ETFs to complement your investments in the broader ETF and invest in utility ETFs for Canada. If you are looking for more options, you should also explore the Canadian Energy ETF or Natural Gas ETF.

They have different selection criteria, and if a stock falls outside the selection criteria, it would not be part of the ETF. As a result, they hold only a limited number of shares, not all in the same portfolio. These investments are based on overall performance, so the share price of an ETF can fluctuate like any stock.

If you want an ETF that tracks the Canadian market, focusing on dividend income and total returns, XIU is the best Canadian dividend ETF you should have in your portfolio. While you can hunt for high-yielding dividend shares, finding a high-yielding and safe yield is as easy as it was on March 11, 2021. The fund trades at a price-earnings ratio of 0.01 and a dividend yield of 2.5%.

The BMO US Dividend ETF (CAD) comprises the CAD Index ETF ZEF, hedged against the US Dollar and the US Dollar Index (USD). It is designed to deliver a return-weighted portfolio of Canadian dividend stocks with an average annual dividend yield of 2.5% and a price-to-earnings ratio of 0.01.

BMO Financial Group’s ETF business, founded in May 2009, is the leading ETF provider in Canada. The ETF is traded on the Toronto Stock Exchange under ETFBMO – REIT and the Canadian Dividend Index ETF. It pays an annual dividend of C $1.00, corresponding to a dividend yield of 2.7% and a price-earnings ratio of 0.01. As of March 5, 2021, the Company has written off a total of $1,832,000 in dividends and $9.5 million in assets under management.

Canadian Utilities pays an annual dividend of C $1.00, equating to a dividend yield of 2.7% and a price-to-earnings ratio of 0.01. Unfortunately, the Canadian utility does not generate enough cash to cover the dividend and has paid out more than twice as much dividends as it has paid out in profits. Unfortunately, Canadian utilities pay out less than half of the reported profit and do not generate enough returns on invested capital to cover dividends.

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