Top Picks 2020: Algonquin Power & Utilities (AQN)

01/14/2020 5:00 am EST

Focus: UTILITIES

Vivian Lewis

Editor and Publisher, Global Investing

My favorite investment idea for 2020 is a Canadian firm that reports under US GAAP accounting, making it a safe retirement holding, explains international investing expert Vivian Lewis, editor of Global Investing.

The stock in focus in Algonquin Power & Utilties (AQN), a cross border low-carbon utility from Canada operating also in the USA. The stock was my Top Pick for conservative investors in 2019; it has risen 41% for the year-to-date.

Utilities are a doing well in this market, a way to get the dividend income we older folks need with less risk than we incur with financial or energy companies.

Algonquin Power is rated "buy" by all Canadian analysts who cover it according toInvestor's Digest — a rare occurrence. Its current quarterly dividend is 14.1 US cents so this is both a growth and a 4% yield stock. It is expected to boost earnings next year from 64 loony cents to 74¢ (which should pan out similarly in US cents).

Algonquin Power just updated its long-term growth program by identifying $9.2 billion in new mostly green greenhouse gas-lowering sustainable investment opportunities over the next 15 years, up from a prior level of $7.5 million and also raised its projected compound growth rate over the next 5 years to 9%-11% per year.

It combines regulated service investment with investment in sustainable energy, like fiber-optics, thermal, hydro, wind, and solar, and also in new sectors like water through its Liberty Utilities Co. subsidiary in southeastern New York (but not in Manhattan.)

It aims to produce 75% renewable electricity by 2023, not that far off by adding 2000 megawatts over that period and reducing carbon emissions by a million metric tons from the 2017 level.

Algonquin Power generates electricity and sells gas and runs about 50 different utility holdings with 768,000 customers in the US and Canada from sea to shining sea, along with indirect interests in 7 other countries.

The utility started out green, with hydroelectricity and grew from that. This is a ute which cuts its CO2 emissions by 10% from year to year. In the first 9-months of the calendar year, Algonquin Power upped its output of electricity, hydro, wind, and solar, but thermal power fell sharply.

The firm is aggressively adding new sites on both sides of the border. Overall, this  is a top play on climate change — and the best stock I can think of for doing well by doing good.

(Editor's note: Vivian Lewis' favorite speculative Top Pick from 2019, Azure Power (AZRE) — another "green" play — also rose more than 40% last year.)

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