Algonquin Power & Utilities Corp (AQN.TO)

(Market Call Minute.) This has done very well, but it is rate sensitive. If rates move up, it could be at risk of a pullback. He would take profits here.

(Instalment Receipt, not the stock.) The company is a half regulated utility and a half renewable power story. Has a lot of exposure in the US, and management is very solid. They are going through a process to buy EDE, a US regulated utility through the use of an instalment receipt, where you put up a 3^rd of the cash on day one, giving you a 5% return on that capital, and is effectively a 15% return. You put up the other two thirds of the capital when the deal closes, which he expects to happen in Q1. This was issued at $33.30, and the par value is $100. Effectively it is a convertible debenture.

(A Top Pick Oct 2/15. Up 34.65%.) This had been cheaper than its peers, but growing better. It also had FX tailwinds, because most of its business was in the US. Now it is slightly more expensive than its peers, but still growing at 22% annually over the next couple of years. Thinks it can grow its dividend 10% year-over-year.

(Market Call Minute.) It is unbelievable how well the stock has done. This is on his very short list of companies he would own, given the right environment. A lot of the assets are in the US. If the Cdn$ gets to the right price and he can get this on a bad day, he would absolutely own it.

$12 Covered Calls expiring in July? He is not sure what is going to induce some volatility in the next 4 weeks, which is what really most option holders are looking for. He likes the name. To value the company, you should be looking at an EV to EBITDA basis, which is typically how utilities are priced. They tend to trade at 11X in Canada.

He doesn’t like this, and doesn’t like power companies generally, because of exposure to coal driven energy, which is going to hurt them.

One of the higher-quality names in utilities. Had owned this up until recently. The utility sector has had quite a run this year, primarily because the threat of US interest rates going up was not as prevalent as had been expected. This has a leveraged balance sheet. In a space where yield is primarily why you are there, it is going to be tough for them to raise the dividend, especially because of debt and their recent acquisition. Feels the 4.6% dividend is high quality and safe.

Empire District Electric company shareholders have approved a merger, and this is going to be accretive. He is modelling 22% earnings per share growth over the next couple of years. Sees them growing the dividend 10% annually for the next few years. Trading at a 19X PE versus its peers at around 18X. It is still compelling enough though. Buy this on a down day or write a Put to get it at a lower price and get paid a nice premium. Dividend yield of 4.6%.

A renewable energy generator. Made a fairly large US acquisition. To him, it looks like you have the best growth of the power and utility group in Canada, for the next year or 2. You could make 10% plus the dividend of 4.61%, which makes it well above average in the group.

Prefers Northland Power (NPI-T), which is primarily growth in wind in Europe. Algonquin’s growth is more in the US. If he were having to make a choice, it would probably by flipping a coin.

Technically there are no signs of the trend discontinuing. There are no lower lows or lower highs. It looks fine right now.

Emera (EMA-T) is selling most of its interest. This will take an overhang off the table and will improve liquidity of this company’s stock. The company is definitely safe, and will probably keep growing over the next few years at a pretty nice clip. Given the nature of their business, he thinks they can sustain their debt level.

Held this until recently, but sold earlier this month because he had been overweight in the utility space and wanted to take some profit. He owns Emera (EMA-T) which owns 25% of Algonquin. They recently did a large acquisition, and already had quite a bit of debt, so that added to their debt load. Because of this, their ability to raise their dividend is going to be somewhat impaired in the coming months and years. Thinks the dividend is safe.

The stock chart looks great. The yield is very attractive and the chart looks bullish.

A great company. Tends to have a nice dividend and the stock price moves relatively steady. Have a lot of nice projects now and in the works, which will continue to allow them to grow.