Algonquin Power & Utilities Corp (AQN.TO)

Has been beaten up incredibly in the last couple of days, on an accounting story. Doesn’t know what the potentials could be. It looks like there is an investigation, but he doesn’t know any more about that. The market tends to sell now and ask questions later. He would be inclined to try to get more information by watching the newspapers. You don’t want to necessarily sell it if there isn’t really an issue at all.

(A Top Pick Feb 28/14. Up 37.52%.) They have been doing a lot of right things. A well-managed company. Current target is $10.50. Yield of 4.1%. He has been adding to his holdings.

(A Top Pick Jan 24/14. Up 48.74%.) He likes the power and he likes the utilities. He’ll be continuing to add to his holdings when he brings some cash back in.

Along with a lot of other utility stocks, this has gone on a tremendous run, especially in the 2^nd half of last year. Have some smaller projects that they’ve been able to bring on and they have had one of the most successful years. A great stock to hold. He owns this through his position in Emera (EMA-T), which owns a significant stake. Nothing wrong with Algonquin, but the valuation might give you a bit of a pause.

Dividend is absolutely safe. A nice stable business model. CEO has a great track record and he thinks they will continue to grow out the business model. The dividend could grow 8-10% over the next couple of years and cash flows will grow to support that. They just did an equity raise to shore up the balance sheet.

Just added a bit to his portfolios. It is a good story. Yield of about 4%. He likes the utilities. They are being built. These make a lot of sense. His company has a $10.50 target on this a year out.

He is concerned about the interest rate sensitivity. But it makes sense to own this one. Decent growth and profit prospects.

They are now declaring the dividend in US$’s. As a Canadian recipient of that US dollar income, you don’t know for certain what your payments are going to be. For some people, having a US income is a good thing. On a longer-term basis, this company did cut their dividend, but are slowly restoring it. Have some interesting growth potential with the pipeline going into Massachusetts. A very attractive kind of portfolio holding.

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.