Toronto-based Algonquin Power & Utilities (AQN, $14.18) held its 2019 Investor Day in early December. And the company had plenty of good news to discuss across meetings in both Toronto and New York.
As the utility stock heads into its next decade of growth, management was keen to discuss its plans for “greening” its regulated business, its pursuit of renewable-energy projects and the simplification of its overall business. To that end, Algonquin plans to spend $9.2 billion over the next five years. Roughly $2.5 billion of its capital expenditures will be directed toward renewable energy. That arm of AQN’s business currently has 3 gigawatts in generating capacity – 79% from wind, and the rest coming from solar, hydro and thermal, ect.
Algonquin also is finding mergers-and-acquisitions (M&A) opportunities that can help it grow on a sustainable basis. In 2019, it closed on acquisitions of St. Lawrence Gas and New Brunswick Gas, both purchased from Enbridge (ENB). Since 2009, AQN has acquired 25 regulated utilities as part of its long-term growth plan.
Algonquin has been one of the best utility stocks over the past few years when considering price and dividends. AQN pointed out in its investor-day presentation that, through Sept. 30, its 10-year annual shareholder return has averaged 23.73% more than three times the S&P/TSX Composite Index (of Canadian stocks) and double the PHLX Utility Sector Index.
Ray James analyst David Quezada came away from Algonquin’s presentation impressed, calling the company “our top power and utility sector pick” in a note to clients. “This planned capex supports expected EPS growth of 9-11 per cent which we believe places AQN well above most North American utility peers,” he states.