Investing in utility stocks can be a wise choice due to their stable financial performance, consistent dividend payouts, and low volatility. Canadian utility stocks are often a staple in investment portfolios because they operate in a highly regulated environment, providing predictable revenues and reduced risk.
Here are two of the best Canadian utility stocks with attractive dividend yields to invest in for November 2023.
Algonquin Power & Utilities
Algonquin Power & Utilities Corp. (TSX:AQN) is a thriving diversified utility company with a strong renewable energy portfolio. With over $2.8 billion in annual revenue and a compelling dividend yield of 5.52%, the company is focused on generating sustainable growth.
Unfortunately for investors in this name, it has been a rough ride over the past couple years. Algonquin has slashed its dividend in the past, running into issues with certain core business segments, which have resulted in a stock price that’s cascaded lower. Indeed, while the stock still yields 7.2% at the time of writing, given the company’s previous dividend cuts, investors may not necessarily view the company’s forward dividend yield the same as the current.
That said, I do like Algonquin’s current revenue mix, and while the firm has posted losses in the past, I think this stock looks attractive here. In fact, Algonquin Power & Utilities stock rose 4% last week after Wells Fargo called it an “attractive opportunity” following a sell-off.
The company’s stock has fallen more than 50% in the past year due to rising interest rates and debt from acquisitions. Algonquin is now attempting to reshape itself as a “pure-play” regulated utility through the sale of its wind and solar power portfolio, which could net US$3 billion.
Fortis
Fortis Inc. (TSX:FTS) is a Canadian utility company with over 3.4 million customers across 10 regulated utility businesses. It generated a profit of $8.7 billion in Q3 2023, an 8.84% increase year over year, and operates in 18 jurisdictions, making it one of the most geographically diverse utility businesses in North America. It has a growth target of a 6.0% yield until 2025.
Fortis has consistently delivered value to shareholders since its inception in 1987. Through strategic acquisitions, Fortis has expanded its operations across North America and the Caribbean, establishing a robust business model that provides dependable cash flow and solid long-term earnings. Its commitment to providing essential services like electricity and natural gas has made it a top choice among Canadian utility stocks.
The company announced its new $25 billion capital plan, the largest in its history, last month. The plan is supported by the Inflation Reduction Act and focuses on regional transmission projects, investments in Arizona, and system adaptation and resiliency.
The plan is low-risk and highly executable, with nearly 100% regulated investments and 18% relating to major capital projects. Approximately 27% of the plan is allocated to cleaner energy investments.
The five-year capital plan is expected to increase the midyear rate base from $36.8 billion in 2023 to $49.4 billion by 2028, translating into a five-year compound annual growth rate of 6.3%.
Furthermore, Fortis has completed the sale of its Aitken Creek natural gas storage facilities to Enbridge Inc. for approximately $400 million. The sale will strengthen Fortis’ balance sheet and provide additional funding for its regulated utility growth strategy.
