Algonquin Power & Utilities Corp (AQN.TO)

This has been one of his favourite stocks. He sees their free cash flow rising 30% compounded annually over the next couple of years. This is from new projects coming online and future rate base hikes. Sees them paying a sustainable 4% dividend, anchored by a 65% payout ratio. He models high dividend growth of 11% compounded annually. It still trades cheaper than its peers.

(A Top Pick Oct 2/13. 45.6%.) This is an interest-rate call. Also, based on the view that markets are not going to be easy over the next 12 months as they were over the last 12. This is a power/utility, a kind of gentle place to be. Yet they've got 30% adjusted earnings growth that he models over the next couple of years. Cheap at 8X versus its peers of around 7.7. He models a 10% dividend growth over the next couple of years. Dividend yield of 4.39%.

(A Past Pick Oct 2/13. Up 45.38%.) He is restricted and can’t make any comments at this time.

Just hit a new high in the last couple of days. Has been rather a dull stock lately. Pays a reasonable dividend. Has a mixed bag of assets, including water plants, sewage plants in Arizona, power plants in Ontario and in the US eastern seaboard. He keeps hoping somebody will take the stock out. A relatively safe investment.

(A Top Pick Aug 16/13. Up 23.13%.) He is starting to get concerned on all his utilities, and is starting to put 5%-10% stop losses on them.

Rising interest rates would be a negative headwind, but it will be for any utility and any equity stock from a valuation perspective. In a rising interest rate environment you want to look for businesses where they can grow their free cash flow and dividend in a measured pace that offsets the rising interest rate impact on valuation. He thinks this is one of those names. Have a unique 2 prong strategy where half the business is a fully regulated utility, and the other half is a contracted independent power generation business. Management has done a good job. They have indicated there is potential of up to $2 billion of incremental projects they can take on. If so, you are looking at a stock that is probably worth $12-$13 out in 2017. If you can get this between $8-$9, you will get a 12%-15% total return over 2 years. Yield of 4.2%, which he expects will be increased every year.

Always look for a faster growth than peers. Sees them growing at 29% over the next three years compounded annually. Expects dividend growth as well.

The utility space is great if you want growing dividends. Assets are regulated, and a company has the ability to price its long-term assets and good cash flow. This one has been doing a good job, especially in the renewables area. He tends to go to larger utilities. There’s no reason why the dividend can’t continue to be increased.

This has solar and wind facilities, but are not a major factor. In most cases, they had government subsidies to help them into the area, but he is not clear as to whether these go on forever. Reasonable yield in a relatively stable company.

It is an interest sensitive stock. He bought back cheap when it was beaten up. It is one of the good investments in the renewable energy sector. Thinks you will see the growth phase resume. He is a regular buyer of this stock on weakness.

He has been adding to it because of the yield. He rates it as a sector outperform. He is moving money out of others and into this one. Couple of good catalysts coming. A solid dividend. Not too vulnerable to rising interest rates.

Doesn’t own this yet but it is one that he will start a position in.

Planning on holding his position for a long time in the future. Have a lot of projects in the pipeline and are very diversified in terms of good balance between power generation distribution and utility holdings. Emera (EMA-T) has a 25% stake in the company so there is the potential this company gets taken out down the road. Great growth and he sees them increasing the dividend on an annual basis.

The whole Canadian energy infrastructure stocks sold off a lot due to the bond yields care and this one sold off even harder. Market is concerned that they are going to need to raise equity, which they probably will do to finance expansion. Estimates their EPS can grow by 45% over the next 3 years from 1) a lot of acquisitions that haven’t yet been closed and integrated and 2) they’re building out $835 million of Canadian contract renewable power for the next 3 years.

Likes the power utilities for their yield and they are good solid companies. His company has an $8 target on this. Has had a pretty good pull back, so this is a pretty good entry point.