Algonquin Power & Utilities has grown rapidly, yet it cuts the potential risk of acquisitions by purchasing profitable utilities. And it continues to trade at a low multiple of projected earnings.
ALGONQUIN POWER & UTILITIES CORP. (Toronto symbol AQN; www.algonquinpower.com) has tripled in size in the past three years, mostly through acquisitions.
The company’s regulated utility businesses now provide water, electricity and gas to over 560,000 customers. That’s up from 120,000 three years ago. Its hydroelectric, thermal energy, solar and wind plants generate 1,300 megawatts, up from 460.
In the three months ended June 30, 2016, Algonquin’s revenue rose 13.5%, to $222.8 million from $196.2 million a year earlier. Cash flow per share increased 27.3%, $0.28 from $0.22. The gains came from new plants, higher rates granted to its regulated facilities and the stronger U.S. dollar.
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Value Stocks: Missouri-based utility is company’s biggest acquisition
In February 2016, the company announced its biggest acquisition to date: the $3.4 billion purchase of Empire District Electric. Missouri-based Empire serves over 218,000 customers through eight power plants with 1,326 megawatts of generating capacity. The deal should be completed in early 2017.
Growth by acquisition—particularly rapid growth—adds risk. But Algonquin cuts that risk by buying profitable utilities. It also ensures its renewable energy projects sell their power under long-term government-guaranteed contracts. In the case of Empire, its customer rates are set by utility regulators to guarantee profits for the company.
The stock trades at 9.3 times its forecast 2016 cash flow of $1.28 a share. Those shares yield 4.7%.
Thanks for this. I hear so much about other utilities from an investment perspective, but not so much about this one. I would love more information on Algonquin.
I’ve held quite few shares of Algonquin in my LIF and RIF’s with DRIP and they maintain my total assets even though I’m obligated to withdraw a minimum each month.Great recommendation!
Deciding between Algonquin and Bell to fulfill my utility portfolio needs. Having trouble deciding.
I’m a 34 year old conservative-growth investor, looking for capital gains over income at this point.
Tough choice.
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Thanks for this. I hear so much about other utilities from an investment perspective, but not so much about this one. I would love more information on Algonquin.
I’ve held quite few shares of Algonquin in my LIF and RIF’s with DRIP and they maintain my total assets even though I’m obligated to withdraw a minimum each month.Great recommendation!
Deciding between Algonquin and Bell to fulfill my utility portfolio needs. Having trouble deciding.
I’m a 34 year old conservative-growth investor, looking for capital gains over income at this point.
Tough choice.