The Motley Fool

1 Top TSX Stock to Buy Now for Income, Growth, and Safety

Image source: Getty Images

A stock that has it all? That’s what we’re all looking for.

Indeed, I think Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) fits the bill nicely. This stock is typically regarded as a regulated utilities player, which it is. However, I think the company’s growing renewables business provides handsome growth for long-term investors.

Impressive growth profile driven by renewables

Algonquin’s growth profile is appealing to me right now. In particular, the company’s renewable power assets are what I think will “power” returns for investors long term. The company has engaged in a number of acquisitions in recent years that have turned out to be well timed. Indeed, a spike in interest in ESG investing has been the tide that has lifted all boats in this sector.

The company generates about one-third of its revenue from its renewable investments. Algonquin has also stated it may be looking at more acquisitions on the horizon. I think this utilities player could try to achieve a 50-50 mix of regulated utilities and renewables.

Indeed, an expansion of this line of business would be positive for this stock in a few major ways. First, renewable energy is just good business. Profit margins continue to rise, as input costs are lowered and demand for renewable power increases. This is a sector with excellent fundamentals. I think 10 years down the road, the fundamentals on this business could be much better than they are today.

Second, ESG investing mandates are a real thing. These secular tailwinds are not just a fad. I think we’re going to see capital inflows into this sector continue to surge for decades to come. Indeed, this is a very positive backdrop for investors looking for well-positioned renewables plays like Algonquin right now.

Income and safety driven by regulated utilities business

Algonquin’s growth overlay is very nice. However, I think the company’s underlying regulated utilities business (which makes up the majority of its revenue) is attractive as well. This business provides the income and defensiveness component I think are critical for investors looking to hold this stock into retirement.

Indeed, Algonquin’s dividend yield of 3.5% isn’t anything to write home about. That said, this yield is bond-like. Algonquin’s core business provides cash flows which are about as stable as one could ever hope for. These cash flows support this current yield along with long-term dividend increases over time. I anticipate Algonquin will continue to hike its dividend yield in the mid- to high-single digit range long term.

The income and safety Algonquin provides really elevates this renewables stock to the top of my list. Accordingly, I don’t think many companies really compare to Algonquin right now in the utilities space on the basis of quality. This is a best-in-class stock for those looking to buy and hold for a few decades.

Like this top pick? Here are 10 more to consider right now:

The 10 Best Stocks to Buy This Month

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.

Click Here to Learn More Today!

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.