Canadian Utilities Limited (TSX:CU) is a fantastic company with a sustainable and growing dividend which should be on the radar of every investor that seeks safety. If you’re worried about the next economic downturn, then the stock may be the perfect shelter to hide in since the company is essentially recession resistant. The stock has flat-lined for almost four years, but could there be a breakout on the horizon?
Canadian Utilities has a diversified portfolio of energy assets that are worth over $7.3 billion. The company operates three divisions: power generation, utilities, and global enterprises. All of these divisions are essential to the average consumer, and it’s very unlikely that the nature of these divisions will change many years down the road. Canadian Utilities is a boring company, but it’s simple, and the future cash flows are very predictable. Most of the company’s cash flows are through long-term contracts, which will ensure investors are rewarded with consistent dividend increases each year.
Solid recession-resistant dividend-growth king for many years to come
The company is one the best dividend-growth kings on the market with an almost guaranteed annual dividend hike in the double digits. The company has upped its dividend by a substantial amount each year over the last decade, even during the Great Recession. The company fared quite well during the recession as the stock only fell by 35% peak to trough, while the average stock lost half of its value.
There’s no question that we’re in the late stages of a bull market, and many pundits believe that signs are pointing to a correction that may happen within the next few years. Nobody knows precisely when this will be, but it’s very important for the Foolish investor to be prepared for such a scenario. If you haven’t loaded up on defensive names, then it may be time to do so before the bulls start running scared.
What about valuation?
It’s no mystery that the stock has been a big loser for the last few years with virtually no capital gains for investors who’ve held the stock during this period. The stock trades at a forward price-to-earnings multiple of 15.9 with a price-to-book multiple of 2.1, both of which are lower than the company’s five-year historical average multiples of 19.7 and 2.3, respectively.
The dividend yield is also considerably higher at 3.5% than the historical average yield of 3%. This dividend is also expected to increase by leaps and bounds over the next few years.
If you’re a long-term income investor that wants to play defence, then look no further than Canadian Utilities.
Stay smart. Stay hungry. Stay Foolish.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
Fool contributor Joey Frenette has no position in any stocks mentioned.