Canadian Utilities is one of the largest utilities in Canada. Atco Ltd is its holding company with more than 50% stake in it.
Canada is its principal place of business accounting for 94% of revenues, while Australia constitutes 5% and other countries are at 1%. The company is looking at expanding its footprint in other global markets including South America, Mexico and the U.S.
Canadian Utilities has core investments in electricity, pipelines & liquids and retail energy business units, as well as its international operations in Australia and Latin America. Its segments are Electricity (70% of 2018 earnings), Pipelines & Liquids (40%) and Corporate & other (-10%).
The company owns an extensive network consisting of 87,000 km electrical powerlines, 64,500 km pipelines, 21 global generating plants with more than 2,500 MW in generating capacity, 85,200 cubic meters per day water infrastructure capacity and natural gas and hydrocarbon storage capacities.Investment Data
- Opportunity Score: 75
- Ticker: TSE:CU
- Sector: Utilities
- Industry: Utilities - Regulated
- Market Cap: 10.56B
- P/E: 10.68
- Dividend Yield: 4.37
- Dividend Payout Ratio: 46.71
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
Canadian Utilities is a regulated utility with 86% of its earnings coming from regulated sources. The remaining 14% is from long-term contracted assets. The company owns regulated electric and gas distribution and transmission assets worth $22 billion serving more than two million customers around the world.
Canadian Utilities engages in delivering integrated energy and industrial water solutions; electricity generation, transmission, distribution; and related infrastructure solutions to its customers. The company serves a wide range of industrial and commercial customers and has a consistent record of quality service and products, and customer satisfaction.
The company provides innovative and customer-focused infrastructure solutions. Given its large scale and inherent cost controls, Canadian Utilities has been successful in achieving better operational efficiencies.
The North is regarded as a long term growth area for Canadian Utilities and the company maintains strategic investments and partnerships across all three northern territories. Its Alberta PowerLine project is ahead of schedule and is expected to begin this March. Canadian Utilities is constructing transmission growth projects which should get completed over the next couple of years. This will create long-term value for shareholders. The company regularly invests in regulated utilities and long-term contracted assets, which support stable and secure cash flows.
Significant investment opportunities in other long-term contracted assets should also drive growth. The company is exploring opportunities to leverage its experience and develop new sources of sustainable energy. It is also investing in the development of a green corridor. Strong backing of ATCO company which is a leading diversified global corporation, further provides clear visibility to future growth.
Canadian Utilities has increased its dividend for 47 consecutive years since 1972 and its last dividend hike was 7.5%. The company sports an impressive dividend yield of 4.7% and has compounded its dividend growth 10% CAGR over the last five years.
A disciplined approach to growth, strong financial and operating performance, continued investment in regulated and long-term contracted assets should help the company grow dividends in the high single digit range in future. The company is expecting its mid-year rate base to grow at ~4% per year through 2020. Its regulated business is expected to demonstrate strong growth through regular capital investments, ongoing earnings and rate base growth. In fact, the company has successfully grown its regulated earnings to 99% in 2017 from just 65% (in 2013).
As an innovative and comprehensive solutions provider, the company engages in providing a variety of services ranging from the delivery of natural gas and electricity to providing modular housing and water infrastructure solutions. The company is also targeting growth in the Mexican market, given an attractive GDP growth forecast and reforms in energy infrastructure.
Canadian Utilities reported strong results in each of its segments last year, driven by growth in non-regulated businesses, continued capital investment and operational cost improvements. The company is expecting high-quality earnings base on the back of strong investments in regulated utility as well as long-term contracted assets through 2021.
Canadian Utilities competes with several utility companies such as Fortis TSE:FTS, Brookfield Infrastructure Partners TSE:BIP.UN, Emera TSE:EMA, Algonquin Power & Utilities TSE:AQN, having a huge presence in the US and Canada.
Fortis is a leading Canadian utility company with assets worth $50 billion and operating through ten utility operators. About 60% of its business is in the US and the remaining 40% is from Canada. Other large competitors are Brookfield Infrastructure Partners and Algonquin Power & Utilities. The latter is another diversified generation, transmission and distribution utility based in North America.
|FTS||Fortis||Utilities||Utilities - Regulated||77||52.72||23.11||14.56||20.49||3.63||3.62||52.62||4||1.91||9.23||1|
|BIP.UN||Brookfield Infrastructure Partners||Utilities||Utilities - Regulated||56||67.65||15.00||255.60||138.16||0.20||3.93||999.99||4||2.01||13.91||1|
|H||Hydro One||Utilities||Utilities - Regulated||37||23.63||14.08||0.00||0.00||1.30||4.09||74.31||4||0.97||4.09||1|
|EMA||Emera||Utilities||Utilities - Regulated||83||52.62||12.56||16.24||18.94||3.25||4.66||75.38||4||2.45||13.65||1|
|CU||Canadian Utilities||Utilities||Utilities - Regulated||75||38.66||10.56||10.68||17.67||3.62||4.37||46.71||4||1.69||13.36||1|
|ACO.X||Atco||Utilities||Utilities - Regulated||65||49.56||5.69||10.05||15.54||4.94||3.27||32.78||4||1.62||15.62||1|
|CPX||Capital Power Corporation||Utilities||Utilities - Regulated||47||31.45||3.36||65.52||21.51||0.49||6.10||391.84||4||1.92||12.65||1|
Canadian Utilities proudly holds the longest track record of annual dividend increases of any publicly traded Canadian company. It is a large utility company providing integrated solutions to customers across Canada. Huge infrastructure assets and a clear roadmap of future investments further solidify its leading position in the utility space. The company should continue its dividend growth streak driven by strong investment in regulated assets and infrastructure growth projects.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.