Algonquin Power & Utilities Corp (AQN.TO)

A good, long term investment. The yield is very attractive. If there is a spike in interest rates, all yields in utilities will pull back. The company has done well.

Ranks in the top 10% of his quant model. Year-over-year earnings gain of 62% plus 43% sales growth. The outlook is positive. Earnings are expected to grow 15% in the coming year. There is a great opportunity for them to be able to continue to grow for the next 2-3 years.

His problem with utilities is that they are not growing organically, but are making acquisitions for growth. As interest rates start to rise, that could cause big issues. Half their business is regulated, but half is not. On the regulated side, they have no choice but to have debt preferred and equity issues. On the nonregulated side, that is where they want to make the bulk of their money because if the renewable assets were to decline, it is going to affect their business. The good news on this is that the US acquisition is pretty much shifting from coal to gas, and they are starting to see better margins.

He does not know the seasonality. Utility stocks do well in the summer. We are in a trading range. We are testing close to the bottom. He would be a bit careful here. Utilities typically underperform the market about now. He is neutral.

The only bad thing is that most earnings are from the US, and the rising Cdn$ is hurting them a little. It has an excellent growth rate. He is looking at 16% EPS over the next couple of years. Trades at the same multiple as its peers, 17X. Has a 61% payout ratio. The Empire acquisition is proceeding very well. If you can get this in the $12 range, you should buy it.

A core position for a long time for him. He buys more on dips. They should be able to grow for many years to come. The dividend is in US$ and should continue to grow.

Canada has done an extremely good job of acquiring companies in the US in the utility sector. Something like 70% of this company’s earnings comes from the US. Management has done an excellent job. They have a target of increasing their dividend 10% per year over the next 5 years, and possibly longer. Dividend yield of 4.6%.

A very nice small-cap and has done very well. Continue holding this if you have it. It has a 4.4% dividend yield.

(Top Pick Oct 28/16, Up 18.83%) It will not do 18% in the next year. It is planning an acquisition. He predicts above average returns, however. It will be important to them to continue making acquisitions for growth.

Has had pretty decent capital appreciation and he expects it to continue. He bought one that paid a higher dividend.

It’s an acquirer, mostly in the US, for growth. There is a rumour they are about to make another acquisition. If so, then the stock goes higher eventually. It is a 3-5 year hold.

One of the smaller utilities, which he thinks means it could be taken out by one of the bigger ones. In the meantime, they have a good mix of energy producers. They are into the water side in the US as well as biotech. Dividend yield of about 4.5%.

With the overlay of clients that need yield and to get a yield that is growing in a rising interest rate environment, this is one of the few utilities that has the ability to grow its dividend, and has a fairly safe growth path. Dividend yield of 4.4%. (Analysts’ price target is $15.)

Long-term hold? One of the characteristics of a great investment is that it generates cash and grows that cash. For a young investor, this company would suit well. A wonderful stock to hold for the next 20-25 years. 4.6% dividend yield.

Cenovus Energy (CEV-T) or Algonquin Power (AQN-T) for long-term gains and dividends? All interest sensitive stocks in a rising interest rate environment tend to pull back, especially so in a sharply rising rate environment, which she does not anticipate in Canada. If we get these pullbacks and high-quality utilities, it is a good time to get in. If you want yield, this is definitely the stock to get into. Cenovus is an energy oil sands producer, whose cash flow is going to be largely predicated on what crude oil does.