Algonquin Power & Utilities Corp (AQN.TO)

(Market Call Minute.) Doesn’t know this one very well.

This fits into the thesis of being pretty defensive. About 90% of their earnings come from the US. Dividend yield of 4.91% is well covered and is capable of growing. He models a 15% free cash flow growth over the next few years. This is one where you get paid and it is not going to hurt you. In this kind of market, pick your time to step in.

(Trying to be conservative on his Top Picks this time.) This has a growth profile where they really know what they are going to be doing between now and 2020. They have the projects lined up which will allow them to ramp them up, increase their dividends and have cash flow for the next project. Dividend yield of 4.87%.

Quality, stability and cash flow is important. 4.88% yield. They have been busy on the acquisition front in the distribution part of the business.

It is a powerful chart. There is no reason to sell this. This stock has much farther to go.

18% earnings per share growth. Nice dividend growth and a 60% payout ratio.

He likes it on pullback as they have a chance of improving their earnings power. It still has a partnership with EMA-T. Between $9 and $9.50 it is a buy and the yield is attractive.

Did own this, but his stop loss kicked him out. His concern with the whole sector is that a lot of the pension funds in search for yield, have acquired quite a few of these companies. Come the fall, if there is any kind of trouble with the market, they are all going to have to liquidate. Because of that, a systematic risk within the system overwhelms his continuation to holding it for now. This is one that he will add when it gets back on. His company has an $11 target and a sector outperform.

(A Top Pick May 25/15. Up 2.59%.) A SHORT. His view is that utilities are in a very dangerous part of the market cycle. Very high valuations. Also, has high debts. People buy this for yield, but it scores poorly on valuation for him. Trading at 16X EBITDA.

(A Top Pick June 12/14. Up 21%.) Still sees this growing at around 18% over the next couple of years. Most of its portfolios are in the US, so you really benefit from a low Cdn$. Still trading below market multiple. Still a Buy.

Short. All the utilities are falling into this bucket of being expensive. Utility stocks are going to be under pressure. They are expensive and carry a lot of debt.

The company said they were delaying the release of their financials, and investors got very worried that there was something wrong. The stock fell off aggressively and the company then announced that there was nothing material that they could find. They then came out with their financials indicating a good quarter, and the stock rebounded. Half of the company is regulated utilities and the other half is renewables that have growth and upside. It strikes a nice balance between safety and growth. Pays a good dividend.

There is a lot of volatility to this story over the last couple of weeks. Management did come out and address why it was down so much over the last week or so. News came out about accounting issues. The earnings don’t alleviate that and we have to get to the bottom of these accounting issues. Wait in case there is more risk to the story than we are aware of now.

All the interest rate sensitives, which include the utilities, are affected by the fear of rising longer-term interest rates. On this one, there is an uncertainty and the stock has come off pretty sharply.

Chart shows a series of higher highs and higher lows from late 2013. That trend was broken earlier this year. The next level of support is going to come in at around $8. Not sure that he would Buy at this point as it might have another $.70-$.80 to go. Chart is not a great-looking one.