Dividend Investors: Top TSX Utility Stocks to Buy as Oil Prices Rise

Oil and gas stocks wax and wane, but utility stocks stay strong. Yet, I would consider this newer one if you’re looking to invest on the TSX today.

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When it comes to the market, what goes down must come up. And honestly, that seems to also be the case for oil and gas prices. Yet in the last week, most Canadian cities actually saw oil and gas prices go down at the pump. It remains a volatile area of the economy, and indeed the market. Which is likely why some investors are looking elsewhere.

For good reason

Oil and gas stocks are already iffy, and have been for a while now. In fact, since hitting highs back in 2018 many have floundered on the market. Once the pandemic hit, this seemed to almost be the nail in the coffin for many oil and gas stocks. There were massive lay offs, dividend cuts, and more as production slowed to a trickle.

This alone caused many countries to realize that clean energy also has its benefits in times of trouble. And that was further proven after pandemic restrictions came down. There was a massive rise in the use of electric vehicles. As Russia invaded Ukraine, European countries put money towards renewable energy so they wouldn’t depend on Russian products.

Even the Organization of Petroleum Exporting Countries (OPEC+) stated by 2040, lower income countries would likely be the biggest consumer of oil and gas. With all this in mind, oil and gas stocks certainly don’t look like as good of an investment. So for more stability, this is why we turn to utility stocks.

Why utility stocks?

Utility stocks have the benefit of simply creating power for essential utilities. They power our homes, our businesses, everything. And that’s no matter what happens on the market, or in the world. While the rise of interest rates and foreign currency exchange could hurt them short term, long term they’ve proven excellent investments.

That’s proven by the fact that the only two Dividend Kings on the TSX today are both utility stocks! This was able to happen thanks to long-term contracts securing revenue for the companies. That revenue is used to both acquire more companies, as well as feed the dividend.

But today, I’m not going to look at one of the Dividend Kings. Both are certainly great stocks, it’s true. But instead, I would look to this other newbie on the market that could produce massive gains.

Consider Hydro One stock

Hydro One (TSX:H) is perhaps the best opportunity for those seeking long-term growth at a great price. H stock is the largest producer of utilities in Ontario, Canada’s most populated province. What’s more, right now energy production comes directly from hydro. Therefore, there’s no fear that the company will see a slump when oil and gas prices change. It will simply remain consistent.

Not only that, H stock also has the benefit of government investments. The Province of Ontario holds a major stake in the stock, with long-term contracts that will keep it running. And yet, it has only been on the TSX today for a few years.

Therefore, it’s a great time to get in on H stock. You can grab a dividend yield of 3.11% as of writing, while it trades at a fair 21.1 times earnings. Shares are up 3% in the last year, which is again reasonable given the market. It trades at 2 times book value, with a 14.4 enterprise value over earnings before interest, taxes, depreciation and amortization (EV/EBITDA). All in all, H stock looks like a great long-term investment. One that could eventually provide investors with another Dividend King.

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

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