Forget Canopy Growth: 3 Utility Stocks to Buy Instead

Utility stocks are cherished for their reliable dividends, and while they may never match the rapid growth pace of marijuana stocks, their long-term returns might be better.

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When it comes to hitting rock bottom, few industries offer as many “examples” as marijuana. Giants like Canopy Growth, which was once a large cap, are now getting close to the lower end of being small caps. But there is still a reason why investors keep an eye out for these stocks.

In the right market conditions, these rock-bottom cannabis stocks can offer rapid and market-beating returns. However, tracking these trends and ensuring you exit on time is too risky for most investors.

Three utility stocks fit the bill if you are looking for something more stable and predictable.

A reliable Dividend Aristocrat

Fortis (TSX:FTS) is one of Canada’s most revered and trusted Dividend Aristocrats and is just a year away from becoming a Dividend King. The 49 years of consecutive dividend growth with a healthy 4.4% dividend yield is reason enough to consider adding this stock to your portfolio, as it promises a reliable income to its investors. However, there are other reasons to invest in this stock.

While the growth has been relatively modest, especially if you compare it to the wild growth of marijuana stocks, it’s decent enough to help you build a sizable nest egg over time. The stock has risen over 72% in the last 10 years, and if it keeps this pace, it may double its capital in fewer than 15 years. The overall returns are more attractive thanks to its generous dividends.

An Ontario-based power distribution company

The Fortis growth pace may be too slow for many investors, so if you are one of them, consider investing in Hydro One (TSX:H). It’s Ontario’s most significant electrical utility company, reaching 1.5 million customers.

However, its infrastructure is disproportionally massive compared to its consumer base because it caters almost exclusively to rural Ontario. This means less population density and long distances covered by wires and other distribution infrastructure.

The stock has been going up at a healthy pace since 2018 and in the last five years, it has risen by over 100%, and at this pace, it can double your money every five years. It’s slightly overvalued, which is expected with such a growth pace and relatively stable returns. It also pays dividends, and the current yield is about 2.8%.

A utility and renewable energy company

Algonquin Power & Utilities (TSX:AQN) can be an excellent pick for investors with a healthy risk tolerance. It was one of the best-growing utility stocks up until a few years ago, when its unhealthy financials and debt caught up to it, causing the company to make some drastic decisions.

That included the sales of part of its business and cutting its dividends, the latter of which was one of the reasons why the stock plummeted 54% in less than two years.

However, Algonquin still retains most of its strengths, such as its diverse portfolio of assets. It’s quite an attractive pick from a dividend perspective, thanks to its generous 6.9% yield. And since the company has recently cut its dividends, it’s doubtful there will be another cut soon.

It has also started growing its payouts at a robust pace. If the stock begins to recover, you can capture the best of both worlds — a solid yield and recovery-based growth.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Algonquin Power & Utilities made the list!

Foolish takeaway

Utility stocks are safe, reliable, income-producing, and usually healthy long-term picks, making them ideal from a retirement-planning perspective. They may not offer as flashy or rapid a growth as marijuana stocks, but the overall returns can be far more predictable and consistent.

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

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