Why Canadian Utilities Limited Is the Best Purchase a Young Investor Can Make

Canadian Utilities Limited’s (TSX:CU) consistent performance make it the ideal purchase for young investors looking for years of profits.

| More on:
The Motley Fool

If you look at only the short-term picture, Canadian Utilities Limited (TSX: CU) may not seem like a compelling investment. The company has not stunned with year-over-year stock performance, nor does it pay an exceptionally high dividend.  However, if you look at its longer-term history, investors in Canadian Utilities Limited have benefited from consistent dividend increases and positive year-over-year stock performance for decades, a trend that is likely to continue.

While young investors may be drawn to trendy sectors that can offer short-term gains, Canadian Utilities may be a better purchase — a steady, predictable stock that over the next 20-plus years should offer profound returns and dividend payments.

Dividend history

Canadian Utilities’ annual dividend yield of 2.69% is nothing to write home about. What is impressive, though, is that it has consistently increased over the past 42 years. While higher dividend yields may seem enticing, they are often not tenable over the long term. Canadian Utilities Limited has already proven that it can sustain and increase its dividend over the long run.

Dividend future

It does not matter how great of a dividend a company pays if its business model can’t  sustain the payout. Canadian Utilities’ business strategy suggests that more dividend hikes are in store: It is investing in Alberta’s growing economy, planning on investing over $6 billion in new electricity transmission infrastructure projects through 2015, and is expanding its services in Australia and betting on green energy. Through these new offerings, it will earn more cash, which in turn can be returned to shareholders.

Stock performance

Beyond dividend payments, Canadian Utilities’ stock is poised to perform well in the future because of the investments the company is making in expanding its business. Although Canadian Utilities does not offer explosive growth, it is the tortoise in the proverbial tortoise vs. hare story. And while not immune to global macroeconomic factors, it has provided consistent, steady returns for investors — ideal for those looking to hold and benefit from years of consistent profits.

In sum

Young investors may be drawn into fad investing, with the mentality that they have the time to take high risks,  but a better approach would be to pick some companies with a consistent and predictable growth profile. These steady companies could be a better pick as they will return a consistent per-share increase as well as higher dividends over decades. Canadian Utilities is a model example of such a company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Stocks for Beginners

Bitcoin
Stocks for Beginners

2 TSX Stocks With Huge Upside as the U.S. Dollar Strengthens

Investors wanting to protect their future need safe Canadian stocks, like these two on the TSX today.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Stocks for Beginners

TFSA: How to Turn $5,000 Into $50,000 Tax-Free!

The TFSA is the best place to invest for growth. Here are some stocks that turned $5,000 into $50,000 in…

Read more »

Striking match creates fire and light.
Stocks for Beginners

10 Stocks Every Canadian Should Own in 2025 [PREMIUM PICKS]

The Motley Fool's yearly list of "Starter Stocks" is our attempt to answer a simple question: “Where do I go…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

I’d Invest $5,000 in This 7.5% Monthly Dividend Stock Before the Market Catches On

Need some extra cash coming in? Then this dividend stock is the first place investors will want to look.

Read more »

concept of real estate evaluation
Stocks for Beginners

This Top TSX Stock Could Be the Perfect Buy During a Housing Correction

If you want a stock you can buy and hold for decades as housing ramps up, this is the one…

Read more »

people relax on mountain ledge
Dividend Stocks

How I’d Build a $1,000 Monthly Income Stream With Just These 2 Stocks

If you need some extra income, and don't we all, these are some of the best recommended stocks to buy…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

The Single Stock I’d Buy to Protect My TFSA During U.S. Trade Tensions

Worried about trade tensions? Then get in on this company that will remain essential. No matter what.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

AI Is Taking Off in Canada, so Here’s the 1 Stock to Buy Now

Not all tech stocks are created equal, and this Canadian super star stock is one of them.

Read more »