2 Top Utilities Stocks on My Radar Today

Here’s why Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) and Fortis Inc. (TSX:FTS)(NYSE:FTS) are top utilities picks today.

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The pandemic is breeding a somewhat rocky market right now. While predicting fiscal trends is difficult in these markets, investors are finding renewed interest in utility stocks. Why? Well, utilities stocks tend to be defensive. And they pay relatively high dividend yields. Accordingly, investors worried about a potential market correction may choose to hide in utilities stocks. After all, it’s generally a safe place to hide.

For those looking for safety and income in this environment, these two stocks are among my top picks.

Algonquin Power

As far as utilities stocks go, Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) remains a great option for any investor. The stability of Algonquin’s core business, combined with its growth potential, makes this one of my top utilities plays.

The stock is fresh off a correction, making now a great time to get into this high-quality utilities play. This company offers investors with some of the best operational efficiency metrics of its peers. Its profit margin of 47% absolutely blows away the industry average of 13%. And there’s a reason for this.

The company’s business model is based on not only regulated utilities, but also a growing renewable energy portfolio. Algonquin has managed to pick up high-quality assets at discounted prices over the years, benefiting long-term investors looking for cash flow growth machines.

Algonquin has used its impressive growing cash flows to not only invest in more growth projects, but also raise its dividend. In fact, Algonquin has been one of the most impressive dividend growers among its peers. Over the past few years, double-digit dividend increases have become the norm. If this continues, Algonquin could become a sneaky dividend growth gem.

I think this stock provides the perfect mix of growth and defensiveness today. At a price-earnings ratio of only 25, I think Algonquin is dirt-cheap, given its growth and income profile.


One of the most significant utilities players in Canada is Fortis Inc. (TSX:FTS)(NYSE:FTS). This company operates a highly defensive business which is also highly diversified. The company operates various electricity transmission, natural gas supply, and power generation businesses in North America and the Caribbean.

Fortis is mainly famous for increasing its dividend payout for almost five decades. Taking a look at the fundamentals will reveal that this firm certainly has the ability to continue to do so over the next five decades. Compared to an average industry price-book ratio of 1.31, it is cheaper than 85% of the companies listed in this industry.

Fortis’ predictable cash flows from its regulated utilities business is the main driver of the company’s ability to raise its dividend consistently. While these regulated contracts otherwise cap upside in inflationary environments, they also provide downside protection. Accordingly, this is one of the safest utilities plays out there.

Fortis’ 3.7% dividend yield may not seem like much on the surface. However, when one considers the kind of dividend growth potential with this stock, it becomes apparent – Fortis is a long-term winner.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

More on Dividend Stocks

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

1 U.S. Stock to Buy That Could Make You a Millionaire

Even though tech stocks are usually the go-to growth picks in the US stock markets, there are quite a few…

Read more »

Increasing yield
Dividend Stocks

My 3 Favourite TSX Dividend Stocks Right Now

These dividend stocks have been a favourite for a while, but even more so now that they trade at such…

Read more »

funds, money, nest egg
Dividend Stocks

New Investors: The 2 Best Options To Earn Regular Passive Income!

You can earn high passive income with dividend stocks like the Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

Read more »

Dividend Stocks

This Canadian 6%-Yielder’s On Sale, But Not for Long!

SmartCentres REIT (TSX:SRU.UN) is a wonderful high-yielding REIT that has a higher yield and lower valuation than most its peers.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

This 1 Canadian Dividend Stock Could Help You Earn Over $100 Per Week in Passive Income

This dividend stock won’t disappoint you if you want to earn reliable passive income in Canada -- equivalent to more…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

TFSA Passive Income: 2 Monthly Dividend Stocks for Canadian Retirees to Buy Now

Retirees seeking tax-free monthly dividends can now buy high-yield stocks at cheap prices for a TFSA focused on passive income.

Read more »

financial freedom sign
Dividend Stocks

3 Selloff Stocks That Could Help Set You Up for Life

Here are three selloff stocks to buy for those who believe that these companies can growth through a rising interest…

Read more »

money cash dividends
Dividend Stocks

Passive Income: Get Over $430 in Dividend Income Every Month

These two top dividend stocks could provide substantial monthly cash flows to supplement your active income.

Read more »