Investors have been shifting towards utility stocks as many in the market take a defensive posture. A number of strong macro headwinds continue to battle the equity markets. Accordingly, utilities are one place many have sought reprieve from a market that seems to only want to go down.
Indeed, utility stocks are among the best long-term passive-income options for long-term investors. These companies generally provide dividend growth over time, making these securities better options for long-term investors seeking yield that can keep pace with inflation. Accordingly, for those with space in a Tax-Free Savings Account (TFSA) and looking to add some dividend exposure, here are two top picks to consider.
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Top utility stocks: Algonquin Power
Algonquin Power (TSX: AQN)(NYSE: AQN) is a growing renewable energy and utility company that’s actually quite impressive in terms of its size. Algonquin has amassed $16 billion of assets across North America and the globe. Notably, the company’s growing portfolio of renewable, clean solar, thermal, hydro, and wind power-generation facilities provides more than four gigawatts of renewable generation capacity under construction and in operation.
Thus, for long-term investors bullish on the transformation toward green energy production, Algonquin is a great option to consider. This is a company that’s been investing heavily in improving its assets and moving them along the clean energy curve.
Over the past five years, shares of AQN have performed very well. This stock has returned 34% over the past five years, at the time of writing, ignoring dividends. And with a yield of 5.4% (paid in U.S. dollars nonetheless), Algonquin’s total returns are much higher.
Thus, this is a utility stock I view as a great growth and yield play. For investors seeking long-term total returns, Algonquin is a name to put on the watch list right now, at the very least.
Fortis
Fortis (TSX: FTS)(NYSE: FTS) is an electric and gas utility organization based focused on the North American market. In this space, the company has a strong market position in key regional areas across the continent.
Fortis’s business model is relatively simple. This company keeps the lights and heat on for millions of retail customers and has for decades. Over time, regulated increases and acquisitions have provided Fortis with growing earnings which the company has passed onto shareholders. Indeed, over the past 48 years, Fortis hasn’t missed an opportunity to hike its dividend.
Thus, with a current yield of only 3.8%, some investors may think — what’s the upside? After all, with short-term treasuries yielding above 4%, there are attractive opportunities out there.
That said, it’s Fortis’s dividend-growth profile makes this stock an attractive bet. Additionally, over the very long term, investors have benefited from strong capital appreciation. I don’t see a situation where this ends suddenly. Folks need to keep their lights and heat on, after all.
