Best Canadian Utility Stocks

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We take the services we provide in our homes, apartments, and businesses for granted. No one pays any heed to the utility industry unless something goes wrong; for example, you find yourself without tap water when there is a power outage or out of the blue. This could be because we don’t go out of our way to purchase these services. These services are delivered to our door in exchange for a hefty bill, yet paying the bills is more of a duty than a conscious decision.

Utilities play an essential role in our day-to-day lives. When it comes to our world’s infrastructure, they are the equivalent of blood in our veins. Nothing works when the electricity goes out, and we’re back in the dark ages. Nothing in our world is more stable than utilities as a company. The utility industry encompasses businesses that provide essential services such as water, sewerage, electricity, dams, and natural gas. With a market capitalization of over $1 trillion, it is a major sector and a crucial element of the Canadian economy.

Utilities are a popular long-term buy-and-hold option since they are solid assets that pay a regular dividend to owners. Dividend yields on Canadian utility stocks are often higher than those on other Canadian stocks. Such equities become appealing during economic downturns with low-interest rates like the Current COVID-19 pandemic.


5 Best Utility Stocks in Canada

Here are fantastic utility stock options for Canadian investors to invest in and ensure a profitable result.


Algonquin Power & Utilities Corp. (TSX:AQN)

Algonquin Power & Utilities Corp. is a rapidly expanding renewable energy and utility company with over $16 billion in assets across North America and abroad. Algonquin Power & Utilities Corp generates, transmits, and distributes energy in North America. In addition, Algonquin owns and operates regulated water, natural gas, and electricity distribution utilities in the United States as part of its distribution group. This division generates most of the company’s revenue, with natural gas distribution accounting for most of that revenue.

On January 3, 2022, Algonquin announced that Liberty Utilities (Eastern Water Holdings) Corp., a wholly-owned subsidiary of AQN, completed the previously announced acquisition of New York American Water Company, Inc. from American Water Works Company, Inc. for a purchase price of approximately $608 million. In addition, on October 26, 2021, the company acquired Kentucky Power Company and AEP Kentucky Transmission Company for a total purchase price of roughly $2.846 billion.

With $528.6 million in revenue, the corporation recorded a 40% rise compared to the third quarter of 2020. Trading at $18.09 as of February 26, 2022 (1:43 am), the company has a bright future, making it the best time to invest. A dividend yield of 4.749% and a P/E value of 14.30 vouches for its profitability.


Canadian Utilities Limited (TSX:CU)

Canadian Utilities Limited is a utility company and a subsidiary of Atco’s logistics company. Electricity (generation, transmission, and distribution), pipelines & liquid (natural gas and water), and Retail Energy are the company’s primary divisions. Based in Calgary, Alberta, the company holds $20 billion in assets and primarily operates in Canada and Australia, with some programs in the United States and Mexico. Atco Energy, a significant partnership formed by Canadian Utilities, delivers Alberta low-cost and ecological energy solutions. 

On November 10, 2021, Pacific Northern Gas Ltd. (PNG) and ATCO Future Fuel RNG Limited Partnership (ATCO Future Fuel) announced a deal to sell and buy Renewable Natural Gas (RNG) from ATCO Future Fuel’s new biomethane facility in Two Hills County, Alberta. As a result, Canadian Utilities Limited earned $586 million ($2.17 per share) in 2021, up by $51 million ($0.21 per share) from the previous year’s $535 million ($1.96 per share). Currently, the company offers a dividend yield of 5.042%.

Trading at $35.24 as of February 26, 2022 (6:40 am), analysts deem this company an outperformer in its field. Furthermore, a market cap of 9,490,021,735 and a healthy trade volume of 455,182 speak for themselves. It has a 10-year CAGR of 18.4% and is nearly a bargain at its current price.


Fortis Inc. (TSX:FTS)

Fortis operates in Canada and the United States, serving over 3.4 million electricity and gas utility customers. The company holds $58 billion in assets and has smaller stakes in electricity generation and several other Caribbean utilities. ITC, a Fortis subsidiary, manages electric transmission in seven states across the United States, with over 16,000 miles of high-voltage transmission lines carrying a peak load of over 26 gigawatts.

FortisBC, FortisAlberta Inc., Central Hudson Gas & ElectricTucson Electric PowerUniSource Energy ServicesNewfoundland Power,  Maritime Electric, FortisOntario, Caribbean Utilities, FortisTCI, and Belize Electricity Limited are some of the subsidiaries of Fortis Inc. The corporation earned a revenue of $9.4 billion while it reported net earnings of $1,231 million, or $2.61 per common share, in the fiscal year 2021.

The company supports and exercises renewable energy production, one of the fastest-growing utilities. By 2021, a 20% decrease in Scope 1 emissions was achieved, supporting a 75 percent reduction target by 2035. Trading at $58.15 as of February 26, 2022 (7:10 am), the company promises a decent dividend yield of 3.68%. The current market cap of this renewable energy company is 27,615,435,000 and is expected to grow in the coming years as the world steers towards clean energy.


TransAlta Renewables Inc. (TSX:RNW)

TransAlta Renewables Inc. is a renewable energy company that owns and operates energy generation and electricity transmission facilities. The company has been in business for about a century and is well-versed in designing, running, and maintaining renewable energy-producing facilities, especially hydro-powered. 

The operating business segments are Canadian Wind, Canadian Hydroelectric, and Canadian Gas. The corporation owns many wind farms in Alberta, Ontario, New Brunswick, and Quebec through its Canadian Wind section. The corporation holds over 100 megawatts of net hydroelectric production capacity under the Canadian Hydro segment across various river systems. A cogeneration facility in Sarnia, Ontario, is owned by TransAlta as part of its Canadian Gas sector. In addition to wind and solar projects in Wyoming and Minnesota, TransAlta owns the South Hedland Power Station and the Fortescue River Gas pipeline in Australia.

The company made $150 million in earnings before taxes, up 23% from 2020, while $336 million in cash flow from operating activities, up 26% from 2020. Trading at $17.01 as of February 26, 2022 (7:26 am), the company has set an attractive dividend yield of 5.526%, making it the best time to invest in this company.


Emera Incorporated (TSX:EMA)

Emera Inc., a $34 billion diversified energy and services firm in North America, is a market leader. The firm generates, transmits, and distributes electricity and gas and provides other utility energy services. It also has renewable energy assets in its portfolio. Emera has operations in Canada, the United States, and the Caribbean, having a consumer base of 2.5 million globally. Emera is striving to achieve net-zero carbon emissions by 2050.

Net income for the fourth quarter of 2021 was $324 million, or $1.24 per common share, compared to $273 million, or $1.09 per common share, in the fourth quarter of 2020. The year-to-date adjusted EPS increased by $0.13 to $2.81 from $2.68 in 2020. The dividend yield for Emera stands at 4.472%, while it holds a market cap of 15,478,712,000. 

The trade volume of 798,085 demonstrates the dynamic sale and purchase of these Canadian stocks. The company is projected to show immense growth this year, trading at $59.26 as of February 26, 2022 (7:42 am). Additionally, the dividend yield for this company looks promising for investors looking for safe long-term investments.

Hydro One Ltd. (TSX:H) – Hydro One is a leading electricity transmission and distribution utility company in Ontario, Canada. The company serves over 1.4 million customers and has a market cap of $21.9 billion. Hydro One offers a dividend yield of 3.391% and is well-positioned to benefit from the growing demand for clean energy and infrastructure investments.


Brookfield Renewable Partners L.P. (TSX:BEP.UN)

Brookfield Renewable Partners is a leading global renewable power company well-positioned to benefit from the growing demand for clean energy. Brookfield is a diversified and geographically balanced player in the renewable energy space with a portfolio of hydroelectric, wind, solar, and storage assets across North and South America, Europe, and Asia. In addition, the company’s stable and predictable cash flows, long-term contracts, and attractive dividend yield make it an attractive option for investors seeking exposure to the utilities sector.

Additionally, Brookfield has a strong track record of value creation through acquisitions and development projects, which bodes well for its future growth prospects. The company has a market cap of $20.8 billion and offers a dividend yield of 2.682%. As a result, Brookfield Renewable Partners is well-positioned to benefit from the growing demand for renewable energy and infrastructure investments.


Northland Power Inc. (TSX:NPI)

Northland Power is a Canadian utility company specializing in producing electricity from clean energy sources such as wind, solar, and hydroelectric power. The company has a diverse portfolio of renewable energy assets in Canada, Europe, and Asia, focusing strongly on offshore wind energy.

Northland Power’s financial performance has been consistently strong, with solid revenue growth and healthy earnings. In addition, the company has a solid dividend history, with a current dividend yield of around 3%. With the increasing demand for clean energy and the company’s strong position in the renewable energy market, Northland Power is well-positioned for long-term growth and could be a good investment.


Innergex Renewable Energy Inc. (TSX:INE)

Innergex Renewable Energy Inc. is an excellent Canadian utility stock because of its focus on renewable energy and sustainable growth. The company operates in Canada, the United States, France, Chile, and Iceland, with a diversified portfolio of hydroelectric, wind, solar, and geothermal power-generating assets. Don’t get me wrong; utilities are generating growth, mainly renewable and green energy companies in Canada.

The company is committed to environmental responsibility, social responsibility, and corporate governance, which can attract investors interested in environmentally friendly companies. In addition, Innergex has a strong track record of generating steady cash flow and increasing its dividend payouts.

The company’s growing renewable energy capacity and strategic acquisitions make it a promising investment in the sustainable energy sector.


Why You Should Invest In Canadian Utility Stocks

Utilities play a crucial role in modern economies. Consider how life would be if you didn’t have access to electricity, clean water, or trash collection. Things would not be the same.

Utility firms have profited from the fact that basic consumer conveniences such as power and running water are highly valued. As a result, some utilities are among the world’s most successful businesses, with constant revenue and growth. So it’s no surprise that utility stocks appeal to so many investors.

Utility stocks are frequently intended to be a low-volatility, income-producing, safe dividend stock of a portfolio, making them great defensive stocks to hold. Utility firms operate in a highly regulated industry with predictable financial flows. It allows for the payout of hefty dividends. As a result, utility businesses with dividend payout ratios much above 50% are easy to come by. In other words, they are boring, and for investors who rely on their stocks for dividend income, boring is excellent! 

This is an impressive series, and if you look at the list, you will find that most of these stocks have a long history of dividend growth. Overall, utility stocks will offer you a good dividend, and if they can grow your holdings at a reasonable rate, they will provide you with a lot of potential for long-term dividend growth.

Experts scoff when someone claims that a stock can only go one way. There’s always a danger that whichever stock you’re involved in inside any industry will decrease in value. Nonetheless, the utility industry is one in which the strong players are most likely to enjoy improvements in the future.

As a result, the companies in the sector that have established the best infrastructure and continue to build their infrastructure will most likely continue to grow simply because the human population expands daily.


What About Utilities ETFs in Canada?

Quite a few Canadian Utilities ETFs are available, but here are the two most notable ones.

BMO Equal Weight Utilities Index ETF (ZUT)

This ETF tracks the performance of the Solactive Equal Weight Canada Utilities Index. It invests in companies that generate, transmit, distribute, or store electricity, gas, or water. The ETF has a management fee of 0.55%, and its holdings are diversified across a range of sub-sectors within the utility industry.

iShares S&P/TSX Capped Utilities Index ETF (XUT)

This ETF seeks to replicate the performance of the S&P/TSX Capped Utilities Index. The index includes Canadian companies involved in producing and distributing electric, gas, and water utilities. The ETF has a management fee of 0.61% and provides exposure to a diversified portfolio of utility companies in Canada.


The Bottom Line

Utility stocks may appear so safe that they never decline in value. This, however, is far from the truth. No investment is entirely risk-free, and failure is always possible. However, utility stocks seldom lose money and, for the most part, increase at a consistent rate, albeit a relatively modest one. A similar industry is banking; since Canada’s five largest banks have paid dividends continuously since the nineteenth century, it makes sense to invest in Canadian banks, which will continue to pay hefty dividends regardless of market conditions.

The utility sector in Canada is a necessary service and will continue to be in demand in the future.