TSX Stocks on Sale: Algonquin Power & Utilities, Fortis, and More

Given their solid underlying businesses and healthy dividend yields, the following three TSX stocks are volatility beaters to add to your portfolio.

| More on:
sale discount best price

Image source: Getty Images

As central banks worldwide take monetary tightening initiatives, economists are projecting a global economic slowdown. Indeed, the disappointing December retail sales in the United States have raised the fear of recession. So, given the volatile outlook, it is wise to strengthen your portfolio with dividend stocks that are trading at attractive valuations. Here are my three top picks.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN) is a utility and renewable energy company that has witnessed substantial selling over the last few months due to weak third-quarter performance and rising interest rates. It has lost around 53% of its stock value compared to its 52-week high while trading at 11.6 times its projected earnings for the next four quarters. Meanwhile, management has slashed its 2022 EPS (earnings per share) guidance amid the delay in the completion of some renewable energy facilities and an expectation of a hold-up in price revisions.

The green power producer is preparing for growth in renewable energy demand. AQN is working on closing the acquisition of Kentucky Power Company and Kentucky Transmission Company. It has also taken several cost-cutting initiatives and announced selling around US$1 billion of its assets to lower its debt levels. Further, the company slashed its quarterly dividend from US$0.1808/share to US$0.1085/share, with its yield for the next 12 months standing at 4.64%.

Crucially, the company generates substantial revenue from regulated utility businesses. So, I expect its financials to be stable and predictable in the coming years. Considering its cheaper valuation, solid underlying business, and healthy dividend yield, AQN would be an ideal buy in this volatile environment.

Fortis

Fortis (TSX:FTS) services around 3.4 million customers across North America, meeting their electricity and natural gas needs. With approximately 93% of its assets engaged in the low-risk transmission and distribution business, the utility generates stable and reliable revenue irrespective of the economic outlook. Supported by these stable cash flows, the company has increased its dividends uninterruptedly for the last 49 years. The dividend yield for the next 12 months stands at 4.05%.

However, over the last few months, FTS stock has been under pressure, losing 14.4% of its stock value compared to May highs. Given its capital-intensive business, investors are worried that rising interest rates could increase its interest expenses, thus hurting its profit margins. Meanwhile, the correction has dragged its NTM (next 12 months) price-to-earnings down to 18.6.

Noteworthy, Fortis has committed to investing approximately $22.3 billion through 2027, expanding its rate base at an annualized rate of 6.2%. Thus, management is confident of raising its dividends at an annualized rate of 4–6% through 2027. So considering its solid track record, stable business model, and healthy dividend yield, I believe Fortis would be an excellent buy at these levels.

TC Energy

My final pick would be TC Energy (TSX:TRP), trading at a discount of 22.5% from its 52-week high. The announcement of leaks at Keystone Pipeline has weighed on the company’s stock price. The recent pullback has dragged its valuation down, with its NTM price-to-earnings at 13.6.

Meanwhile, TC Energy operates a midstream energy business, with approximately 95% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) produced from rate-regulated assets and long-term contracts. Further, the company is focusing on expanding its rate base and has planned to invest around $34 billion through 2026. The resultant cash flows could grow its adjusted EBITDA at a CAGR of 6%.

So, TC Energy could maintain its dividend growth in the coming years. TRP stock has raised its dividends uninterruptedly at an annualized rate of 7% since 2000. Also, the company could benefit from growing LNG (liquefied natural gas) exports from North America to Europe.

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 Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Bad apple with good apples
Dividend Stocks

Safe and Sound Stocks for Canadians: My Top 5 Choices

Want some of the best stocks for Canadians right now? Here's my top 5 list of stocks to buy today…

Read more »

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

2 TSX Dividend Stocks With Yields Above 7% That You Can Buy With $100

Here are two high-yielding TSX dividend stocks you can buy with less than $100 per share today and hold for…

Read more »

oil and gas pipeline
Dividend Stocks

Should You Buy Enbridge Stock on a Pullback?

Down 25% from all-time highs, Enbridge stock remains a top investment choice due to its diversified business and steady cash…

Read more »

Redwood trees stretch up to the sunlight.
Dividend Stocks

2 Fantastic Growth Stocks to Buy Right Now

These two growth stocks aren't your average growth stocks, as shares rise higher and higher after earnings, and more's to…

Read more »

Businessmen teamwork brainstorming meeting.
Dividend Stocks

1 Magnificent Dividend Stock Down 15% to Buy and Hold Forever

Enbridge is off the 12-month lows but still trades at a large discount to its 2022 high.

Read more »

Increasing yield
Dividend Stocks

My Top 5 Ultra-High-Yield Dividend Stocks to Buy in May

If you’re looking to build a passive-income stream, these five dividend stocks should be on your radar.

Read more »

Payday ringed on a calendar
Dividend Stocks

A 10.6% Dividend Stock That Provides Monthly Cash Payments

A dividend stock with a mouth-watering yield providing monthly cash flow streams.

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in May 2024

These three REITs have envious growth potential and trade cheaply today, making them three of the top Canadian stocks to…

Read more »