If you were to look up what’s interesting investors right now in the world of finance, it’s fear. Fear of an artificial intelligence (AI) bubble. Fear of sticky interest rates. There’s fear of recessions, trade tensions, multi-regional investment issues, and simply where to hide during all this risk.
Well, if there’s one safe spot to hide, it’s in Canadian utilities, especially during a market crash. So today, let’s look at why Canadian utilities offers some of the best opportunities for long-term growth, all while providing you with a good night’s sleep during the volatility.
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Why utilities
If there’s one reason and one reason only that utilities are a great investment, it’s this: they’re essential. Whether it’s electricity, natural gas or water, households and businesses alike cannot work without them. Demand is steady, and that’s the case whether there’s a recession or not. Therefore, utilities generate stable and reliable revenue and cash flow through any market cycle.
This built-in stability allows investors to avoid stress and stay away from the fear that one earnings report is going to send their returns into a spiral. It also means they can stress less during periods of downturns. When markets are turbulent, investors shift money into sectors with lower risk and more predictable returns. Utilities hold their value during these times, and dividends even soften the impact of declines.
Speaking of dividends, these too are dependable. Predictable cash flows and regulated rate structures allow Canadian utilities to pay and grow dividends, often for decades! These steady payouts can therefore be a lifesaver during volatility, with investors able to pick up dividends and reinvest in the stock for when the market recovers. It’s also what the companies themselves tend to do, spending on infrastructure when prices are down to create gradual, steady growth.
Consider AQN
Now there are a lot of Canadian utilities to consider, but Algonquin Power & Utilities (TSX:AQN) could be great for investors looking for a bit more growth in the short term. That’s because AQN recently had a rough go, but it has since moved towards becoming a pure-play regulated utility. And that means stability at a great price.
Regulated utilities, as mentioned, have predictable cash flow and protection during downturns. This has been on the upswing for AQN, as seen during recent earnings. Investor guidance recently improved, with adjusted earnings per share (EPS) projected to grow from $0.30 to $0.32 in 2025, and as high as $0.46 by 2027. That’s while being supported by $2.5 billion in planned infrastructure spending.
Of course, it’s important to discuss why the utility stock is now on a recovery mission. Net earnings have been under pressure from the sale of assets. A dividend cut of 40% also shows the payout was not sustainable under past conditions. And with its debt-to-equity (D/E) at 120%, it seems it’s still a work in progress. Even so, that dividend could still payout $325 from a $7,000 investment each year, allowing investors to reinvest while AQN recovers.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| AQN | $7.76 | 902 | $0.36 | $325 | Quarterly | $6,996 |
Bottom line
Utilities remain some of the best investments out there, yet AQN gives you a bit of a boost. It provides a long-term strategy that focuses on regulated operations and infrastructure spending to restore stability. Investors getting in now could see higher growth than with other utility stocks, while also bringing in a safe dividend.
