3 Cheap Utility Stocks to Buy for Protection But Keep for Returns

Dividends? Check. Growth? Check. Cheap? Absolutely. That’s what you get by investing in these utility stocks on the TSX today.

| More on:

Image source: Getty Images

Utility stocks are often touted as a safe place to keep cash during downturns. And there are certainly clear reasons for that. We need utilities to power much of what we do on a daily basis. They offer solid growth, returns, and passive income from dividends.

However, there is a shift coming. The world continues to shift over to clean energy, and that means there is even more opportunities coming for utility stocks. Many already use clean energy to power their assets. Yet with a shift towards this, there is likely to be even more investment and more use of these companies in the near and distant future.

So, if you’re looking for stability right now, and growth in the future, these are the three cheap utility stocks I would pick up on the TSX today.

Hydro One

While Hydro One (TSX:H) is the youngest of the utility stocks I’ll cover here, don’t count it out. The company has a strong growth portfolio due in the future. However, this has caused shares to increase, as more investors learn to invest in these safer companies.

Hydro One stock is now trading at 22.6 times earnings as of writing, with shares up 13.6% in the last year. That’s quite the accomplishment given the current market we’re trading in, even as a utility stock. While it remains on the more expensive side, long term, I would still count this as a cheap stock. That’s given the amount of growth analysts have been bullish about for years.

Finally, there is also the stock’s dividend to consider. Hydro One stock currently offers a yield at 2.81%, so investors will certainly have some income to look forward to while they wait for growth in the short and long term.

Canadian Utilities

Analysts have actually been decreasing their price target for Canadian Utilities (TSX:CU). This came after earnings results fell below estimates during the last report. However, full-year results remained solid, and in 2023, there could be significant improvement.

Yet Canadian Utilities stock is one of the more diverse utility stocks out there — in terms of both assets and location around the world. After a climb in 2022, shares have now fallen to a more affordable level. So, I would certainly consider picking it up now at these levels.

Canadian Utilities stock now trades up just 3% in the last year at 17 times earnings as of writing. And don’t forget, this is the only stock on the TSX today offering over 50 years of consecutive dividend increases. You can now bring in a yield at 4.56%.

TransAlta Renewables

Finally, we have perhaps the best opportunity when it comes to the emerging renewable energy sector. TransAlta Renewables (TSX:RNW) operates within every type of power generation, including renewable gas. It therefore has an immense diverse set of renewable energy assets, providing a large opportunity in the future.

But presently there are opportunities as well. Analysts specifically like the Alberta power market for TransAlta stock, and the next year could be quite promising. So, with such a diverse line up of growth in the future, investors would certainly do well to consider the stock.

Shares of TransAlta stock currently trade at 1.93 times book value as of writing, with a dividend yield at 7.39%. So, there is definitely reason to pick up the stock on the TSX today. Even with shares down 28% in the last year.

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 Amy Legate-Wolfe has no positions in any of the stocks mentioned. The Motley Fool has no positions in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

bulb idea thinking
Dividend Stocks

TFSA Investors: 2 High-Yield TSX Stocks With Great Dividend Growth

These top Canadian dividend-growth stocks now trade at discounted prices.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

How Much Can You Really Earn in Passive TFSA Income?

With a diversified portfolio of high yield stocks like Enbridge (TSX:ENB) you could potentially get up to $4,400 per year…

Read more »

data analyze research
Dividend Stocks

2 Stocks to Invest in a Sideways Economy

Not all stocks are equally vulnerable to the weak economy and market, and the right stable investments can help you…

Read more »

Value for money
Dividend Stocks

Why Canadian Investors Should Add This Value Stock to Their Portfolios

This value stock is down now, but this comes all from outside impacts. A year from now, you'll likely wish…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

This 7.1% Dividend Stock Pays Serious Cash

After the pullback, Enbridge stock offers a compelling dividend yield of almost 7.1% It's a good consideration for passive income.

Read more »

stock research, analyze data
Dividend Stocks

3 TSX Stocks With Unbeatable Passive Income and Bargain Prices

Three TSX stocks trading at bargain prices are buying opportunities for their relatively safe and sustainable dividend payments.

Read more »

value for money
Dividend Stocks

3 Cheap Dividend Stocks Paying up to 10%

Income-seeking investors can consider buying shares of high-dividend stocks with monthly payouts, such as Slate Grocery REIT.

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Retirees: Here’s How to Boost Your CPP Pension

The CPP can only cover a portion of your daily expenses. Take control of your pension, and boost the $811…

Read more »