Are you looking for quality dividend stocks to add to your portfolio in August? If so, Canadian utility stocks are a pile worth looking into. Almost all Canadian utilities pay dividends — in many cases, large amounts of them. In this article, I’ll explore three Canadian utility stocks that may be worth adding in August.
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Fortis
Fortis (TSX: FTS) is a Canadian utility stock with a 4% dividend yield and 50 years of dividend increases under its belt. The stock’s incredible dividend track record gives it the title of “Dividend King,” one of only a handful of such stocks to exist in Canada. It is one of the best-regarded utilities in the country.
What gives Fortis such an illustrious dividend-growth track record?
First and foremost, it is a utility, and most utilities (especially regulated ones) have very stable revenue. They supply an essential service (heat and light) while often being near monopolies in their service areas. As a result, consumers very rarely cut out or fail to pay utility bills.
Secondly, Fortis is relatively unique among Canadian utilities in that it has invested heavily in growth over the years. Specifically, it spent much of the 1980s and 1990s investing in U.S. and Caribbean utilities. Today, it is undergoing a capital expenditure program that it says will increase its rate base. Overall, there are many reasons to be excited about Fortis stock.
Brookfield
Brookfield Renewable Partners (TSX: BEPC) is a Canadian renewable energy company that operates as a renewable utility, among other things. Its most recent win was scoring a deal to supply Microsoft with 10.5 gigawatts of clean power. The biggest such deal in history, it has the potential to generate considerable revenue.
Apart from that specific catalyst, there are other things to like about BEPC. First, it’s been growing, with revenue up 21% and earnings up 11% in the last 12 months. Second, it’s fairly profitable, with a 15.7% net income margin (“net income” is a profit measure, so I’m talking about the profit margin essentially). Third and finally, it is part of the Brookfield Corp ecosystem, a group of companies that has a stellar reputation and has been praised by top investors ranging from Chuck Akre to Howard Marks.
Transalta Renewables
Transalta Renewables (TSX: RNW) is another renewable energy utility. It’s involved in wind, solar, and natural gas. It supplies electricity to businesses across Alberta. Its focus on renewable energy gives it access to federal credits and subsidies at times, depending on which government is in power. It has a 19.5% net margin and a 15.7% free cash flow margin (free cash flow is a cash-only measure of dividend-paying ability). It grew its earnings 104% over the last 12 months and has a buyback underway.
These signs are mostly positive, although the 104% earnings growth alarmingly coincided with a 10% revenue decline in the trailing 12-month period. I’m definitely less certain about this utility play compared to the other two on this list, but it is an important renewable utility in Alberta whose shares merit a careful look.
