Investing in Canadian utility stocks should help you derive a steady stream of passive income. Utility stocks are part of recession-resistant sectors, which allows them to generate stable cash flows across market cycles. Further, a sizeable portion of these cash flows is distributed to shareholders in the form of dividends.
In this article, I have identified two Canadian utility stocks to buy and hold for steady income in 2025 and beyond.
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Is this Canadian utility stock a good buy right now?
Valued at a market cap of $9.6 billion, Canadian Utilities (TSX: CU) is engaged in the electricity, natural gas, and retail energy businesses. In 2024, Canadian Utilities reported adjusted earnings of $647 million, up from $596 million in 2023.
During the fourth-quarter (Q4) earnings call, newly appointed president and chief operating officer Bob Myles highlighted a significant strategic pivot, suggesting the company may look toward natural gas power generation rather than continuing its previous focus solely on renewables.
“If we had chatted a couple of years ago, we were very focused on solely renewables. But we really see the world changing a little bit right now, being more receptive to gas-fired [generation],” Myles told investors.
Canadian Utilities’s ATCO Energy Systems segment delivered adjusted earnings of $632 million in 2024, an 11% increase year over year, driven by rate base growth and an increase in the allowable return on equity (ROE) from 8.5% in 2023 to 9.8% in 2024.
However, Canadian Utilities warned investors that 2025 earnings growth will moderate as the allowable ROE resets to 8.97%, which is expected to impact earnings by $15 million.
CU also announced plans to invest $5.8 billion in Canadian regulated utilities over the next three years, driving an expected average annual rate base growth of 5.4%.
A key project is the Yellowhead Mainline, a $2.8 billion natural gas pipeline that will deliver 1.1 billion cubic feet per day of additional gas to support industrial development east of Edmonton. Canadian Utilities expects to receive regulatory approval in Q2 of 2025 and commence construction in mid-2026.
Chief Financial Officer (CFO) Katie Patrick noted that CU doesn’t foresee needing external equity to fund growth in the short to medium term; the magnitude of planned capital expenditures, particularly for the Yellowhead pipeline, will eventually require additional funding.
Analysts remain bullish on the TSX stock and expect it to gain 10% from current levels. After adjusting for dividends, cumulative returns may be closer to 15%. Canadian Utilities pays shareholders an annual dividend of $1.83 per share, up from $0.55 per share in 2005.
Is the TSX stock a good buy in 2025?
Valued at a market cap of $11 billion, AltaGas (TSX: ALA) offers you a dividend yield of 3.3%. These payouts have risen by 6% annually in the last three years. AltaGas operates as an energy infrastructure company and reported a normalized EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.77 billion in 2024, up 12% year over year. Comparatively, adjusted (EPS) earnings per share grew 15% to $2.18. AltaGas confirmed its 2025 outlook, maintaining EPS guidance between $2.10 and $2.30 and EBITDA guidance of $1.82 billion.
AltaGas shipped record global export volumes of more than 122,000 barrels per day of LPG (liquified petroleum gas) to Asia in 2024, with VLGCs (very large gas carriers) departing its terminals every four to five days.
The company’s major growth projects — the $2.8 billion REEF export facility and the Pipestone 2 gas processing plant — remain on time and budget.
CFO James Harbilas highlighted the company’s deleveraging progress, noting that adjusted net debt decreased by $460 million in 2024. AltaGas ended the year with a 4.4 times net debt-to-normalized EBITDA ratio, moving toward its four times goal.
