Algonquin Power & Utilities is a diversified utility company in North America with $11 billion in total assets.
The company engages in the generation, transmission, and distribution of water, gas, and electricity to communities across the U.S. and Canada. Algonquin is also active in international infrastructure development through its AAGES JV and its 41.5% equity interest in Atlantica Yield.
Algonquin Power has two operating subsidiaries: Liberty Utilities and Liberty Power. The company has more than 50 power generation facilities and 20 utilities across North America.
Algonquin’s utility business serves nearly 804,000 customers in twelve states across the U.S., through more than 11,600 km of electricity and 8,399 miles of gas distribution lines. As a growing renewable energy company, Algonquin Power owns a strong portfolio of long term contracted wind, solar and hydroelectric assets with 2GW of total installed capacity.
The company caters to over 1 million customer connections, largely in the United States and Canada.
Key Investment Data
- Opportunity Score: 73
- Ticker: TSE:AQN
- Sector: Utilities
- Industry: Utilities - Renewable
- Market Cap: 12.16B
- P/E: 10.75
- Dividend Yield: 4.28%
- Payout Ratio (TTM): 42.80%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 8/10
- Dividend Income Fit: 8/10
Revenue Growth & Market Exposure
Algonquin Power owns a diversified portfolio of rate-regulated and non-regulated electricity, natural gas, and water utility businesses.
Liberty Utilities owns and operates a portfolio of regulated water, electricity, and gas utility operations while Liberty Power owns and operates a diversified portfolio of non-regulated renewable and clean power generation assets located across North America consisting of wind, solar, hydroelectric, and thermal facilities.
The company derives 80% of its revenues from distribution business and the remaining 20% from generation business. Since its inception in 1988, Algonquin has grown to over 70 power generation facilities and utilities in Canada and the U.S.
Algonquin Power typically enters into long-term purchase power agreements with an average contract length of 14 years or more providing longer-term visibility to cash flows. The company is expanding organically within its rate regulated generation, distribution, and transmission businesses, and also through acquisitions.
Algonquin is known for developing and acquiring assets that are built for the long-term. APUC has successfully grown its regulated utility assets at 25% CAGR over the last five years.
The acquisition of ESSAL and BELCO, helped APUC reach out to more than 1 million customer connections across the U.S., Canada, Chile, and Bermuda.
The company also completed the Great Bay II Solar Project and Sugar Creek Wind Project further consolidating its clean energy footprint. APUC has a solid renewable energy portfolio of long-term contracted wind, solar, and hydroelectric generating facilities representing over 2 GW of installed capacity and ~1.4 GW of incremental capacity under construction. It witnessed decreased consumption across commercial and industrial customers, as a result of the pandemic.
The company continues to keep growing both its regulated and non-regulated asset base. A robust business model, a strong pipeline of investment opportunities, and financial flexibility should assist future growth.
Algonquin Power & Utilities is a Dividend Aristocrat registering ten consecutive years of double-digit dividend growth. It last raised its dividend by 10%. Its dividend yield currently stands at 3.7% and its payout ratio is ~75%.
It compounded its dividend growth at more than 10% per annum in the last three years. Algonquin Power anticipates an EPS growth of 8%-10% CAGR which should support its dividend growth streak in the future.
The company is targeting cash flow and dividend growth through strategic acquisitions and operational excellence. Investing in opportunities that offer stable cash flow in renewable energy and regulated utility sectors has been a core business strategy for Algonquin Power. The company expects 10% annual dividend growth for FY2021, with a targeted payout ratio of 80%-90%.
Algonquin began the implementation of cost containment strategies which resulted in cost savings of $18 million. It targeted to achieve further expense reductions of $5-$10 million in the last three months of 2020.
The company expects adjusted EPS of $0.71-$0.76 for FY2021 and forecasts a CAGR growth rate of 8%-10% for the five-year period 2021-2025.The company has a CapEx plan of $9.4 billion from 2021 through 2025 targeting strong rate base growth, adding over 1.6 GW of new wind and solar capacity, and providing cost-effective solutions to customers.
A growing pipeline of renewable energy development projects, significant growth opportunities, and a conservative business platform are Algonquin Powers’ strong competitive advantages.
On a side note, AQN pays their dividend in US dollars which means the dividend is converted to Canadian when it pays. If you prefer to keep the dividend in USD, you can do so by holding AQN on the NYSE since it is a dual listed stock. It also means the yield fluctuates bases on the currency exchange when you hold it on the TSX.
Algonquin Power competes with several utility companies such as Fortis Inc., Brookfield Infrastructure Partners, TransAlta Renewables, ATCO, etc. 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, TransAlta Renewables, and ATCO.
TransAlta Renewables is one of the largest generators of wind power in Canada while ATCO is a diversified company providing services and business solutions globally.
|TSE:AQN||AQN||Algonquin Power & Utilitties Corp||Utilities||Utilities - Renewable||0.73||19.88||12.16||10.75||10.75||0.83||0.0428||0.4280||4||0.68||0.1330||8||8||Tollbooth - Unregulated||NO||YES||YES||NO||Canada||1||4.28|
|TSE:BEP.UN||BEP.UN||Brookfield Renewable Partners L.P.||Utilities||Utilities - Renewable||0.34||49.12||13.50||0.00||0.00||-0.92||0.0309||0.0000||4||1.22||0.0947||4||2||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||3.09|
|TSE:BEPC||BEPC||Brookfield Renewable Partners L.P.||Utilities||Utilities - Renewable||0.40||52.94||19.15||0.00||0.00||0.00||0.0286||0.0000||4||1.22||0.0286||3||5||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||2.86|
|TSE:BLX||BLX||Boralex Inc.||Utilities||Utilities - Renewable||0.35||39.27||4.03||85.05||85.05||0.44||0.0168||1.3960||4||0.66||0.0491||4||3||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||1.68|
|TSE:INE||INE||Innergex Renewable Energy Inc||Utilities||Utilities - Renewable||0.54||21.75||3.91||0.00||0.00||0.07||0.0331||0.0000||4||0.72||0.0507||5||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||3.31|
|TSE:NPI||NPI||Northland Power Inc.||Utilities||Utilities - Renewable||0.43||43.78||9.88||36.27||36.27||1.21||0.0274||0.8180||12||1.20||0.0380||3||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||2.74|
|TSE:RNW||RNW||TransAlta Renewables Inc.||Utilities||Utilities - Renewable||0.41||21.97||5.86||41.50||41.50||0.52||0.0428||1.7730||12||0.94||0.0554||2||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.28|
Algonquin’s growing renewable energy development projects pipeline, organic growth opportunities within its rate regulated generation, and strong distribution and transmission businesses are its future growth drivers.
The company is targeting growth from its expanding global pipeline of renewable energy and electric transmission development projects, organic growth within its rate-regulated businesses, and strategic acquisitions.
Algonquin’s strong utility business should continue to deliver stable and predictable earnings and cash flows in the future.