There is a constant demand for utility stocks from investors looking to benefit from strong secular tailwinds. Indeed, the rise of artificial intelligence (AI) and high-performance computing within so many areas of the market means we’re going to need a lot of energy. Add on the electrification trends we’re seeing with electric vehicles (EVs) and almost every gas-powered tool out there, and you’ve got a long-term growth trajectory for electricity consumption that positions many utility stocks well for the long term.
For those looking for top Canadian utility stocks to consider (given how overlooked these companies can be relative to their U.S. counterparts), here are three great options to consider.
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Fortis
Fortis (TSX: FTS) is a Canada-based oil utilities giant that provides natural gas and electricity distribution services to millions of residential, commercial, and industrial clients in North America. The company has expanded into the U.S. market but retains a strong presence in Canada, which has been noted for its relatively high acceptance of regulated utilities growth in past decades.
This has allowed Fortis to benefit from strong revenue and cash flow growth over time. The company has consistently passed on its excess earnings to investors via dividends for more than five decades straight now. Accordingly, from a dividend perspective, this utility stock remains a top buy for investors seeking a 4.3% yield.
Importantly, Fortis is also executing a transition focusing on a cleaner energy future. Moreover, through its execution of the capital plan, the company enhances its shareholder value and their investment in the long term, making it a suitable stock option to invest in.
Brookfield Renewable Partners
Brookfield Renewable Partners (TSX: BEP.UN) is a renewable power generation company and a subsidiary of Brookfield Asset Management. The company owns, operates and invests in global hydroelectric, wind and solar facilities, storage facilities, and distributed generation.
Brookfield Renewables recently reported its financial results for the first quarter of 2024. In the report, the company highlighted its funds from operations of US$296 million, or 8% year-over-year growth. Moreover, Brookfield Renewables continued to increase development activities during the period, generating more power.
Brookfield Renewable Partners expects to bring more than 7,000 megawatts of new renewable capacity by the year-end. In addition, the company secured a contract to deliver approximately 5,200-gigawatt hours per year of generation. This strategic move will help Brookfield Renewables to earn huge profits over the long term, increasing the dividend yield (of around 5.7%) consistently for long-term shareholders.
Hydro One
Hydro One (TSX: H) is one of Canada’s largest electricity transmission and distribution service providers. The company serves more than 15 million customers in Ontario or approximately 26% of the people in the region. In addition, the company operates a small telecom business, Acronym Solutions, with an annual revenue of less than 1% to consolidated results.
Hydro One Limited recently reported its first quarterly results for 2024, highlighting basic earnings per share of US$0.49, a rise from US$0.47 on a year-over-year basis. In addition, its capital investment for the period was US$673 million and in-service additions of US$240 million, a significant year-over-year increase.
Hydro One Limited has an attractive dividend yield with a 70-80% target payout ratio. The company operates in a transparent, stable, and collaborative rate-regulated environment. Moreover, the company’s strong governance structure enables it to operate anonymously. This tends to lead the business to generate higher profits, thus making it one of the best stocks to invest in the market for future growth.
