3 Reasons I’ll Never Sell Hydro One (TSX:H)

Hydro One Ltd. (TSX:H) is another undervalued utility that investors should snag in 2020 and prepare to hold onto for the long haul.

| More on:

Last week, I’d discussed three reasons why I’m hanging onto Fortis for the long haul. Today, I want to zero-in on another top Canadian utility: Hydro One (TSX:H). In this article, I’ll explore three reasons I’m never letting go of this stock.

Hydro One: The top utility in Ontario

Hydro One is the top utility in the most populous Canadian province. This alone makes it a desirable target for those who are seeking exposure to this sector. Indeed, the company has stepped up during these trying times to offer relief to its sprawling customer base in Ontario.

On August 7, Hydro One announced that it would extend its ban on residential electricity disconnections. This was done to ensure that no customer was disconnected during a time when utility services were most needed. Its Pandemic Relief Program has also remained in place. This allows customer to apply for financial relief and payment flexibility in a time that has seen Canadian jobless rates soar to historic levels.

Naturally, Hydro One also benefits from Ontario’s huge customer rate base. This was one of the reasons the stock was so desirable when it made its public listing in November 2015.

The company has been reinvigorated since 2018

Shares of Hydro One have climbed 12% in 2020 as of close on August 18. The stock is up 20% year over year. Hydro One started hot after its 2015 IPO, surging into the summer of 2016. However, it experienced a prolonged rut that extended into late 2018.

The recently elected Ontario premier, Doug Ford, fulfilled a campaign promise and ousted Hydro One’s CEO and the entire board of directors. At the time, no one really knew what to expect after this headline-grabbing maneuver. In August 2018, I’d suggested that Hydro One was still worth a look due to its stability and dividend.

Hydro One has defied expectations since the stunning outer of its leadership team. The stock managed to gain momentum after losing out on its proposed acquisition of the U.S.-based Avista. Things have continued to look up in the first six months of 2020.

In the second quarter of 2020, the company delivered adjusted earnings per share of $0.39 compared to $0.26 in the prior year. This was driven by historically hot summer weather and offset by higher COVID-19-related expenses. In the year-to-date period, Hydro One has posted revenues of $3.52 billion over $3.17 billion in the first six months of 2019. Net cash from operating activities has soared to $923 million — up from $415 million in the previous year.

Why Hydro One is a great option for income investors

Like its peers, many investors chase after Hydro One for its reliable dividend. In 2020, the company increased its quarterly dividend to $0.2536 per share. This represents a 3.6% yield. It has delivered dividend growth in every year since its public listing. Better yet, Hydro One stock offers great value right now. It last possessed a favourable price-to-earnings ratio of 9.3 and a price-to-book value of 1.6.

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.

Fool contributor Ambrose O'Callaghan owns shares of FORTIS INC and HYDRO ONE LIMITED. The Motley Fool recommends FORTIS INC.

More on Dividend Stocks

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Building an RRSP Fortune: 4 Key Insights

The RRSP is not only a tax-saver but a wealth-builder for Canadian income earners.

Read more »

Sliced pumpkin pie
Dividend Stocks

Market Sell-Off: Why These 2 TSX Blue-Chip Stocks Are Too Attractive to Ignore Right Now

Investors worried about the sell-off due to trade tensions might want to secure their investment capital by investing in these…

Read more »

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

Transform Your TFSA Into a Tax-Free Monthly Income Machine ($193 a Month!)

These TSX dividend stocks offer high yields and monthly payouts. You can earn over $193 in tax-free income per month.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA: Invest $10,000 in This TSX Stock That Thrives During Market Volatility

This TSX stock isn't your typical investment, but that could be a major benefit for investors.

Read more »

GettyImages-1394663007
Dividend Stocks

8% Yield: 2 Stocks I’d Buy in April 2025

April had a bearish start because of Trump’s reciprocal tariffs. This dip created an opportunity to lock in an 8%…

Read more »

A worker uses a laptop inside a restaurant.
Dividend Stocks

A Misunderstood Growth Stock Down 23%: Why I’m Considering goeasy for a $5,000 Investment

goeasy stock remains a good growth stock for a diversified long-term investment portfolio.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Invest $25,000 in These 3 Dividend Stocks for $150 in Monthly Income

These three high-yielding dividend stocks would generate a monthly dividend payout of over $150.

Read more »

dividends can compound over time
Dividend Stocks

These Magnificent TSX Dividend Stocks Look Worthy of a $25,000 Long-Term Investment

Here's why you should consider investing in TSX dividend stocks such as GWO and Canadian Pacific Kansas Railway.

Read more »