Utility providers can sometimes be uninspiring stocks that provide little opportunity for growth, and investors are normally happy with just collecting a dividend. Fortis Inc. (TSX: FTS)(NYSE: FTS) is a blue-chip stock in the industry, and in its last fiscal year it saw just 1% growth, but with a reliable dividend of over 3%, long-term investors are likely unfazed. However, there are other options that might be able to provide more growth opportunities for investors, and I’m going to look at one specific option in the industry that could be a good buy today.
Emera Inc. (TSX: EMA) is a smaller player in the industry with less revenue and a smaller market cap, but it could have significant growth opportunities ahead. The company is a utility provider with operations across North America, and its strategy has focused on using lower carbon energy sources in its aim to be more environmentally friendly. The company’s focus on clean and renewable energy initiatives give it a lot of opportunity for long-term growth and success in the industry as demand for green energy continues to rise.
Acquisitions have helped the company expand and grow sales
In its most recent quarter, the company’s $1.4 billion in revenue almost tripled the $499 million it posted in 2016. A big reason for that is the company’s acquisition of TECO Energy, Inc. in 2016, which is a big operator in Florida, and it also helped Emera post a 53% improvement in its top line for 2016. In total, Emera has nine subsidiaries and four equity investments that span various parts of North America. The company has some operations in the Caribbean and could see its financials negatively impacted as a result of the hurricane damage this year, but with less than 8% of Emera’s sales coming from the Caribbean, the disruption might not have a material impact on the company’s top line.
The company recently hiked its dividend 8%
In late September, Emera announced it would be raising its quarterly dividend from $0.5225 to $0.565, and the stock now yields over 4.7%. In five years, the company’s dividend has grown 61% for a compounded annual growth rate of 10%. By comparison, Fortis has hiked its payouts by just 33% over the same period of time, and its dividend yield of 3.5% falls well short of Emera’s.
A look at the share’s price in comparison to its peers
Currently, Emera’s stock trades at 30 times its earnings and is a bit higher than the 20 times that Fortis trades at, but less than Algonquin Power & Utilities Corp.’s (TSX: AQN)(NYSE: AQN) multiple of 33.
Should you buy Emera today?
If you’re looking for a good dividend stock to buy and hold for years, then Emera would be a great addition to your portfolio with its excellent dividend growth and strong yield. If you are looking for growth, you may want to wait for a dip first, since the share price might be a bit expensive and it is not far from its 52-week high of $49.24.
Over the long term, the stock presents a great opportunity, and with a higher dividend, it might be a better option for investors than Fortis or Algonquin.
