Imagine that. You’re an investor who never has to think about investing. It sounds impossible, right? Well, with the right blend of stocks and a Canadian utility stock at the centre of it, that’s certainly a possibility. In fact, it’s practically an inevitability! Today, let’s look at why Canadian utilities are a great way to set and forget your investments, and one to watch on the TSX today.
Canadian utilities
Investors wanting explosive growth will hate utilities. Instead, these are best for low and slow burns, like a romance that lasts a lifetime. Utility stocks are perfect for long-term growth, stocks you don’t have to think about because they combine stability, income, and slow-but-steady expansion. What’s more, these stocks can thrive in any market environment.
That’s because utilities are essential services. These provide electricity, gas, water, and everything that a household or business will need, no matter what. Its demand is built into the business, making cash flow predictable, turning the cash into reliable dividends. Those dividends are incredibly reliable, with many having payout histories stretching back decades and consistent annual increases.
But there’s more to come for these utility stocks. This comes from the renewable energy transition and regulated infrastructure projects. Whether you’re looking at the expansion of 5G, the need for more data centres, or clean energy projects, utilities are at the heart of them all. And as these are backed by regulators under long-term contracts, it’s a more reliable income coming your way.
Consider EMA
Given all this, Emera (TSX:EMA) looks like a powerful opportunity. The utility provider offers stronger-than-average growth prospects, thanks to a heavy United States footprint and investment program. For long-term investors, it’s an ideal opportunity for those seeking dividends and compounding growth.
This was demonstrated during its recent earnings report. Adjusted earnings per share (EPS) surged 50% in the second quarter, with year-to-date adjusted net income jumping from $367 million to $615 million! Revenue also increased about 23% year over year, showing the company isn’t just maintaining stability but expanding. Currently, it has $3.4 billion in capital investment this year alone, with a 7% to 8% expected rate base growth through 2029!
Then there’s the dividend. Emera stock currently offers a 4.5% dividend yield, with steady income backed by that reliable cash flow. A debt-to-equity ratio of 150% does mean the company leans on borrowing to fund its projects. Yet that’s not abnormal in the utility stock sector. So, right now, even a $7,000 investment could bring in $313 each and every year!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| EMA | $64.57 | 108 | $2.90 | $313 | Quarterly | $6,974 |
Bottom line
Canadian utility stocks are a strong investment in any portfolio, allowing you to focus on life while your portfolio quietly compounds. Emera is a strong option in this area, with defensive stability and stronger-than-average growth prospects. So, for long-term investors wanting to get in on utilities, this is one to consider on the TSX today.
