ALGONQUIN POWER & UTILITIES CORP. $7.88 (Toronto symbol AQN; Shares outstanding: 206.9 million; Market cap: $1.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www.algonquinpower.com) has nearly tripled in size over the past two years through acquisitions.
Algonquin bought four companies in 2012, and seven more in 2013. These moves included a $140.7-million U.S. deal for a natural gas distributor in Georgia with 64,000 clients.
The company’s regulated utility businesses now provide water, electricity and natural gas to over 480,000 customers, up sharply from 120,000 a year ago. In addition, Algonquin’s hydroelectric, thermal energy, solar and wind facilities generate 1,125 megawatts of power, up from 460.
Emera (Toronto symbol EMA), a recommendation of The Successful Investor, our conservative growth advisory, owns 24.5% of Algonquin.
The company’s acquisitions are paying off: in the quarter ended December 31, 2013, they increased Algonquin’s revenue by 47.8%, to $205.3 million from $138.9 million a year ago. Cash flow per share jumped 57.1%, to $0.22 from $0.14.
Growth by acquisition—particularly rapid growth—adds risk. But Algonquin cuts that risk by buying profitable utilities. It also ensures that its renewable energy projects sell their power under long-term, government-guaranteed contracts.
The stock trades at 8.8 times Algonquin’s forecast 2014 cash flow of $0.90 a share. It yields 4.3%.
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