Stock Market Crash 2021: Time to Consider These 3 Utility Stocks

With lower interest rates and fear of a stock market crash, it’s time to consider utility stocks.

| More on:
HIGH VOLTAGE ELECRICITY TOWERS

Image source: Getty Images

With interest rates being too low, and valuations appearing stretched for most TSX-listed stocks, it’s prudent to add some top-quality utility stocks to your portfolio for 2021. Utility stocks offer better yields than bonds, which is almost guaranteed. Meanwhile, they act as a perfect hedge amid a stock market crash, which many fear could occur soon.

So, let’s delve into three top utility stocks that are likely to add stability to your portfolio, generate steady income, and provide decent growth in 2021. 

Fortis

With its strong operational and financial performance, Fortis (TSX:FTS)(NYSE:FTS) has consistently generated strong returns and handily outperformed the broader markets over the past several years. In the past two decades, Fortis has delivered an average annualized total return of 14%, implying a $100/month investment in Fortis stock over the past 20 years would now be worth $131,634.

Fortis’s regulated utility assets account for 99% of its total earnings, making it relatively immune to stock market volatility and economic situations. Its high-quality utility assets generate predictable cash flows that drive dividends. Fortis has been increasing its dividend for 47 years and could continue to boost it further, thanks to its continued rate base growth in the coming years. 

Fortis expects its rate base to increase by 6% annually over the next five years, which sets the stage for strong growth in its earnings and dividends. The company projects a 6% annual growth in its dividends over the next five years and offers a dividend yield of 3.8%. 

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) is a top dividend-growth stock that should be a part of your portfolio. The company’s diversified utility and renewable asset base generate high-quality earnings and drive its dividends. 

The company has consistently increased its dividends by 10% annually over the past 10 years and remains well positioned to increase it further at a similar rate in the coming years. Besides paying higher dividends, Algonquin Power & Utilities stock has gained significantly in value over the years. Its stock has jumped over 553% in the last 10 years. Meanwhile, it is up about 16% this year and outperformed all of its peers.

With its growing regulated asset base, accretive acquisitions, and investments in renewable power and infrastructure assets, Algonquin Power & Utilities could continue to deliver impressive growth in 2021. The utility company currently offers a dividend yield of approximately 4%.

AltaGas

AltaGas (TSX:ALA) offers a perfect mix of income and growth, thanks to its low-risk and high-growth utility and midstream operations. Notably, most of its earnings come from regulated and contracted assets. While the rate-regulated utility assets provide stability and growth, its midstream operations witness higher export volumes and accelerate its growth further. 

AltaGas projects a 20% growth in its earnings for 2021, reflecting the strength of its core business. Meanwhile, it raised its dividends by 4%. 

AltaGas remains well positioned to deliver robust growth in 2021, thanks to its continued rate base growth, new customer acquisition, higher global export volumes, and cost-reduction measures. The utility company offers a high yield of 5.3%. 

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends ALTAGAS LTD. and FORTIS INC.

More on Dividend Stocks

analyze data
Dividend Stocks

Got $250? Here Are 3 Smart Stocks to Buy Now

Are you looking for some smart stocks to buy? Here are three options that offer growth and income that you…

Read more »

Profit dial turned up to maximum
Dividend Stocks

2 TSX Stocks to Buy With Dividends Yielding More Than 3%

These two TSX stocks offer ultra-high dividends and, more importantly, stability towards a solid future of passive-income payments.

Read more »

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

Passive Income: 3 Top TSX Stocks That Pay Dividends Monthly

Given their high yields, attractive valuations, and stable cash flows, these three TSX stocks are excellent buys for income-seeking investors.

Read more »

Man making notes on graphs and charts
Dividend Stocks

Put Your Cash to Work: 3 Cheap TSX Stocks (With Dividend Yields of +5%) to Buy Now

Make your money work for you. Earn over 5% dividend yields with these under-$20 stocks.

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

2 Oversold TSX Stocks for TFSA and RRSP Investors to Buy Now

These top TSX dividend stocks look oversold.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern
Dividend Stocks

2 Top High-Yielding REITs to Beat Inflation

Real estate investors can beat the 7% inflation by investing in these two high-yielding REITs.

Read more »

Increasing yield
Dividend Stocks

Passive-Income Alert: 2 Top TSX Stocks to Buy Now for 6% Yields

Top TSX dividend stocks now trade at discounted prices.

Read more »

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Dividend Stocks

Which Canadian Stocks to Buy Ahead of a 2023 Recession?

Fortis stock may not be cheap, but it looks like a far better bet than bonds or GICs as rates…

Read more »