Are you looking for stable growing income? If so, you should have these stocks on your radar. They offer sustainable yields of 4.5-5.6% with dividend growth potential of at least 5% per year.
High-growth utility with a 4.5% yield
Algonquin Power & Utilities Corp (TSX:AQN)(NYSE:AQN) has returned about 24.6% on the TSX in the last 12 months. The utility offers a U.S. dollar-denominated dividend which benefits Canadian investors no matter if they opt to receive its dividend in the Canadian or U.S. currency. For U.S. investors, Algonquin offers above-average growth in the relatively stable utility space.
Algonquin continues to execute. In Q1, its adjusted earnings per share increased 19% and its assets grew 94% compared to Q1 2016.
These are thanks partly to its acquisition of Empire, which added 218,000 new water, gas, and electric utility customers to its portfolio, as well as 1,400 MW of regulated electrical power generation.
Algonquin also put in service 210MW of net power generation capacity, of which 160MW has 20 years of power purchase agreements, which implies stable cash flow generation from those facilities.
The utility offers an above-average yield with an above-average growth rate. Due partly to the strength of the U.S. dollar, Algonquin yields 4.5% and aims to grow its dividend by 10% a year.
Thomson Reuters analysts have a mean 12-month price target of C$14.20 on the stock. So, it’s fairly valued. Investors looking for stable, growing income can consider the shares today. However, weakness in the U.S. dollar will bring the yield down for Canadian investors. Investors looking for a margin of safety should wait until a pullback to at least the low C$13 level.