The heat wave that hit certain parts of North America like British Columbia, Seattle, Portland, and New York highlights how essential utilities are.
Apparently, when utility infrastructures are built, extreme weather is not accounted for, which is why cities like New York warned citizens to conserve power. They asked citizens to avoid using major appliances and limit electricity usage to reduce the risk of a wide-area power outage.
Hundreds of lives have been lost because of this heat wave. The demographics that are most at risk include seniors, children, and pregnant women.
In any case, if you’re affected by the heat wave, make sure to stay hydrated and cool. Consider going to the mall to enjoy air conditioning in the hottest hours and stay under the shade when you’re outside.
Utilities are essential no matter if the economy is doing well or badly. People need to use electricity, gas, and water no matter what. So, utilities are one must-have dividend stock in your income portfolio. Specifically, you want utilities that are large enough to make stable earnings year in year out and pay sustainable dividends.
Here are some of the dividend-paying utility stocks that I own in my income portfolio: Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN), Fortis (TSX:FTS)(NYSE:FTS), and Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP).
This week we took the opportunity to buy the dip in Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN). The company reports in USD and pays a USD dividend. So, we’re going to discuss the dividend stock on the NYSE and in USD.
The latest dip was triggered by an equity offering of US$1 billion. The reference price for the equity units is $15.00 per common share.
AQN stock Business Overview
Algonquin consists of two business segments: regulated utilities (natural gas, electric, and water) and non-regulated renewable energy (wind, solar, hydro, and thermal). Its renewable energy portfolio primarily consists of long-term contracts that have inflation escalations. Together, its portfolio allows it to generate stable earnings and cash flow.
Buy the Dip in Renewable Energy Stocks
Year to date, the stock has pulled back along with other renewable utility stocks. Investors can also consider Brookfield Renewable Partners L.P. (TSX:BEP.UN)(NYSE:BEP) and Northland Power (TSX:NPI). However, Algonquin provides the biggest yield of the three. It has also been a little more resilient, likely due to its exposure to regulated utilities that make up about two-thirds of its business.
A couple of weeks ago, I wrote that “as the U.S. dollar has weakened against the Canadian dollar, it could be an opportune time for Canadians to buy U.S. stocks and for Americans to stick with U.S. stocks instead of buying Canadian stocks.”
Since then, as shown in the chart below, the USD has recovered slightly.
Notably, the USD is still a way off from its five-year midpoint of approximately C$1.30. Moreover, the WTI oil price is at a high point of +US$71 per barrel, which could weaken from there. Therefore, Canadian and U.S. investors alike are probably better off continuing to invest new money in U.S. stocks trading at good valuations.
Much like two weeks ago, I still find value in Bristol-Myers Squibb (NYSE:BMY). Merck (NYSE:MRK) that’s in the same space is also similarly undervalued. The dividend stocks offer decent yields of about 3%.