1 Top TSX Hybrid ESG Play to Buy Today

Here’s why I think Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) is among the best utilities plays on the market today.

| More on:
calculate and analyze stock

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

In recent years, there has been a stark shift in how investors select their portfolio picks. Today, multiple criteria are used to select stocks. Yes, capital appreciation and dividends are great. Indeed, total returns are still the primary focus of investors. However, the social impact of the stocks one owns is growing increasingly important today.

Various institutional investors have implemented ESG-related mandates to their portfolios. And retail investors are jumping aboard this move.

Accordingly, companies like Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) are beginning to look attractive today. Here’s why I think investors should consider this hybrid ESG play today.

Balanced business model with an ESG tilt

Algonquin’s growth path hasn’t been a traditional one utilities investors may be used to. Indeed, this utilities player has prioritized renewable energy production for decades, acquiring its way into new businesses Algonquin’s management team believed to be the future.

Whether these are regulated water utilities, hydroelectric facilities, or other renewable energy projects, Algonquin has amassed an impressive portfolio of energy and utilities businesses. The company’s renewable energy installed capacity of over 2 GW makes Algonquin a decently-sized player in this space.

Of course, Algonquin’s regulated utilities business serving over 1 million customers in Canada and the U.S. shouldn’t be overlooked. The defensiveness of these regulated revenues provide gives investors a nicely balanced business model.

On the one hand, the long-term growth of Algonquin’s renewable energy portfolio is attractive. On the other hand, investors get an extremely stable defensive utilities play.

Fresh off of a correction

Despite otherwise decent earnings, Algonquin has been selling off in recent weeks. In fact, the company’s share price is now down more than 10% from its 52-week high amid broader market volatility which has brought down valuations across the board.

Now, Algonquin did miss on its recent earnings, reporting quarterly EPS of $0.20 per share versus an estimated $0.21 per share. This miss of only one penny echoes the previous quarter’s results as well. Accordingly, given the expectations that are being priced into all stocks today, it’s perhaps unsurprising to see the stock market take a breather here.

However, for long-term investors looking for a nice entry point on a high-quality long-term holding, this is it. Investors are now able to pick up shares of Algonquin with a yield of more than 4% at the time of writing. For a company with the growth prospects of Algonquin, such a yield certainly looks attractive today.

Bottom line

Algonquin is one of those rare hybrid ESG plays I think is well-suited to every long-term investor portfolio.

This is among the highest-quality companies on the TSX and continues to offer investors a healthy long-term growth trajectory. Finding well-balanced plays like this is difficult to do. Accordingly, I think investors ought to consider Algonquin at these levels today.

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.

More on Dividend Stocks

edit Person using calculator next to charts and graphs
Dividend Stocks

The 3 Best Dividend Stocks for Monthly Passive Income

These three dividend stocks are the best options for those seeking high passive income in the next few years in…

Read more »

clock time
Dividend Stocks

Got $10,000 to Invest? 1 Cheap TSX Stock to Buy Right Now

This top TSX dividend stock is finally on sale and has made some savvy buy-and-hold investors quite rich.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want Monthly Passive Income? These TSX Dividend Stocks Are for You

If you want monthly passive income from TSX stocks, you have to do a little digging. I've given you a…

Read more »

ETF chart stocks
Dividend Stocks

3 International ETFs to Buy for a Diversified Portfolio

Some international markets may prove more resilient against economic downturns, and exposure to them may strengthen your portfolio during crashes…

Read more »

Payday ringed on a calendar
Dividend Stocks

TFSA Pension: 3 Canadian Dividend Stocks to Buy for Monthly Passive Income

These high-yield Canadian stocks look good to buy right now for a TFSA focused on monthly passive income.

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

Need $500 Right Away? These 3 Passive-Income Stocks Have Got You Covered

I could really use an extra $500 to feed my kids, who seem to be permanently hungry. Couldn't you?

Read more »

Young adult woman walking up the stairs with sun sport background
Dividend Stocks

3 Top TSX Stocks to Begin Your Investment Journey

Given their solid business models and stable cash flows, these three TSX stocks are ideal for income-seeking investors.

Read more »

Community homes
Dividend Stocks

Housing Market Crash: How to Make a Profit 

The housing market crash is here, but you can still earn dividends with Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP).

Read more »