3 top utility stocks on my radar this year
If you aren’t planning to sell your stocks, any of your stocks, any time soon – you and I shouldn’t fear market calamity or pullbacks.
If anything, it should be time to celebrate.
Why? Stocks are on sale!!
Historically, market volatility triggered by interest rate increases do not bode well for utility stocks. We saw this in action last year…
The first reason for this is because rate increases tend to make bonds look more attractive to conservative investors. The second major reason is because higher interest rates are a hit to the borrowing costs of these huge businesses. Major utility companies often service considerable debt to deliver their capital projects – infrastructure construction costs do not come cheap.
The good news is, at least for utility investors, these costs are often passed onto utility customers. Over time, higher utility costs will deliver more revenue; more revenue can increase the company’s cash flow. More cash flow is good for maintaining the company’s dividend and can provide additional opportunities for more dividend increases.
While more threatening, rising interest rates may put pressure on the utility sector short-term I see value and growth in this sector long-term. On that note, here are some top utility stocks on my radar for the rest of this year.
Algonquin Power (AQN)
Algonquin Power & Utilities Corporation is a regulated utility company with assets across North America. From their company website, the company acquires and operates green and clean energy assets including hydroelectric, wind, thermal, and solar power facilities, as well as sustainable utility distribution businesses (water, electricity and natural gas) through its two operating subsidiaries: Liberty Power and Liberty Utilities.
The way I see it, long-term, the demand for electricity and natural gas services is not going to slow down. I am only happy to buy more of AQN in 2019 if the stock price stumbles.
What’s not to love about a well-run company that has increased their dividend, annually, to buy-and-hold shareholders for almost a half a century?
From their company website: Fortis has its roots to 1885. In the generations that followed, the company eventually became Newfoundland Light & Power Co. Limited which became the first wholly owned subsidiary of Fortis Inc. Fortis was created as a holding company in 1987 with the mission to expand and diversify. Today, Fortis is a leader in the North American utility industry with assets of $50 billion and 2017 revenue of $8.3 billion. Our more than 8,500 employees serve utility customers in five Canadian provinces, nine U.S. states and three Caribbean countries.
Any decline in Fortis price with more interest rate increases planned for 2019 and I’m likely to buy more of this stock – as I continue to run many stock dividend reinvestment plans across my discount brokerage portfolio.
Capital Power (CPX)
Capital Power owns approximately 4,500 megawatts of power generation capacity at 24 facilities and is pursuing contracted generation capacity throughout North America. It is a growth-oriented company that is focused on developing, acquiring, owning and operating power generation facilities using a variety of energy sources: natural gas, wind, and solid fuel facilities.
At the time of this post, Capital Power offers an attractive 6% yield and has been increasing their dividends, steadily, since 2013. The company is also striving to grow their dividend by 7% per year for the next 3 years.
At the end of the day, if you expect to be an investor for the next 5, 10 or even longer years – you should jump for joy when stock prices fall and/or when they stay depressed.
This is because your favourite stocks, including your utility stocks, are on sale. 😉
Do you own any utility stocks in your portfolio?
Let me know in a comment below what you think of this sector. Mark