Canada markets closed
  • S&P/TSX

    -11.65 (-0.06%)
  • S&P 500

    -9.94 (-0.23%)
  • DOW

    -106.58 (-0.31%)

    -0.0001 (-0.02%)

    +0.70 (+0.78%)
  • Bitcoin CAD

    -77.98 (-0.22%)
  • CMC Crypto 200

    -2.18 (-0.38%)

    +5.30 (+0.27%)
  • RUSSELL 2000

    -5.32 (-0.30%)
  • 10-Yr Bond

    -0.0420 (-0.94%)

    -12.18 (-0.09%)

    -0.34 (-1.94%)
  • FTSE

    +5.29 (+0.07%)
  • NIKKEI 225

    -168.62 (-0.52%)

    +0.0008 (+0.11%)

3 Cheap Utility Stocks to Buy for Protection But Keep for Returns

Image source: Getty Images

Written by Amy Legate-Wolfe at The Motley Fool Canada

Utility stocks are often touted as a safe place to keep cash during downturns. And there are certainly clear reasons for that. We need utilities to power much of what we do on a daily basis. They offer solid growth, returns, and passive income from dividends.

However, there is a shift coming. The world continues to shift over to clean energy, and that means there is even more opportunities coming for utility stocks. Many already use clean energy to power their assets. Yet with a shift towards this, there is likely to be even more investment and more use of these companies in the near and distant future.

So, if you’re looking for stability right now, and growth in the future, these are the three cheap utility stocks I would pick up on the TSX today.

Hydro One

While Hydro One (TSX:H) is the youngest of the utility stocks I’ll cover here, don’t count it out. The company has a strong growth portfolio due in the future. However, this has caused shares to increase, as more investors learn to invest in these safer companies.

Hydro One stock is now trading at 22.6 times earnings as of writing, with shares up 13.6% in the last year. That’s quite the accomplishment given the current market we’re trading in, even as a utility stock. While it remains on the more expensive side, long term, I would still count this as a cheap stock. That’s given the amount of growth analysts have been bullish about for years.

Finally, there is also the stock’s dividend to consider. Hydro One stock currently offers a yield at 2.81%, so investors will certainly have some income to look forward to while they wait for growth in the short and long term.

Canadian Utilities

Analysts have actually been decreasing their price target for Canadian Utilities (TSX:CU). This came after earnings results fell below estimates during the last report. However, full-year results remained solid, and in 2023, there could be significant improvement.

Yet Canadian Utilities stock is one of the more diverse utility stocks out there — in terms of both assets and location around the world. After a climb in 2022, shares have now fallen to a more affordable level. So, I would certainly consider picking it up now at these levels.

Canadian Utilities stock now trades up just 3% in the last year at 17 times earnings as of writing. And don’t forget, this is the only stock on the TSX today offering over 50 years of consecutive dividend increases. You can now bring in a yield at 4.56%.

TransAlta Renewables

Finally, we have perhaps the best opportunity when it comes to the emerging renewable energy sector. TransAlta Renewables (TSX:RNW) operates within every type of power generation, including renewable gas. It therefore has an immense diverse set of renewable energy assets, providing a large opportunity in the future.

But presently there are opportunities as well. Analysts specifically like the Alberta power market for TransAlta stock, and the next year could be quite promising. So, with such a diverse line up of growth in the future, investors would certainly do well to consider the stock.

Shares of TransAlta stock currently trade at 1.93 times book value as of writing, with a dividend yield at 7.39%. So, there is definitely reason to pick up the stock on the TSX today. Even with shares down 28% in the last year.

The post 3 Cheap Utility Stocks to Buy for Protection But Keep for Returns appeared first on The Motley Fool Canada.

Free Dividend Stock Pick: 7.9% Yield and Monthly Payments

Canada’s inflation rate has skyrocketed to 6.9%, meaning you’re effectively losing money by investing in a GIC, or worse, leaving your money in a so-called “high interest” savings account.

That’s why we’re alerting investors to a high-yield Canadian dividend stock that looks ridiculously cheap right now. Not only does it yield a whopping 7.9%, but it pays monthly!

Here’s the best part: We’re giving this dividend pick away for FREE today.

Claim your free dividend stock pick * Percentages as of 11/29/22

More reading

Fool contributor Amy Legate-Wolfe has no positions in any of the stocks mentioned. The Motley Fool has no positions in any of the stocks mentioned. The Motley Fool has a disclosure policy.