Algonquin Power – Doing it, Doing it, Doing it Well

Algonquin Power

Que – LL Cool J

Algonquin Power – Doing it, Doing it, Doing it Well

The market keeps just roaring forward and good stocks with a decent value are getting even harder to find every month. Recently we averaged up on our Algonquin Power position and with a P/e ratio currently just under 20, I think it’s trading at a fair price.

Renewable’s

In our ever changing world there is one thing for certain. There is a massive move towards cleaner energy moving forward. Almost every country has made these green targets and seem to be moving full steam ahead to achieve those goals.

Here in Canada The Canadian federal government recently announced that the carbon tax will increase from its current $30 per tonne of greenhouse gas (GHG) emissions to $170 per tonne in 2030 – an increase of 566% over 10 years. – Source

Clearly this isn’t a move that isn’t favourable for us Canadian’s, as it will jack our gas prices right up and everything in general. But what it does show is how serious things are getting!

Do I think its too extreme? Of course, but at the same time things need to change. Parking lots are full of trucks, and  a lot of those owners don’t have a single callus on their hands. Its unnecessary and higher fuel prices will probably start to curb that right off the bat, but the carbon tax will drastically hurt the economy.

As an investor I really enjoy holding renewable energy company’s.  They have been some of our best stocks from a total return point of view. (Up 60% on Algonquin Power and 245% on Brookfield Renewable) Consistent dividend growth and capital appreciation is what you want and this sector tends to provide that at the moment.

Unfortunately green energy companies have also gotten expensive but Algonquin hasn’t gone parabolic like some of its peers. (I wonder if this has something to do with its natural gas exposure?)




Investor Presentation

They recently had their investor day and I got to say I was impressed with their plans. Algonquin continues to deliver. They plan on spending 9.2 billion in the next 5 years towards renewables and other regulated utility projects.(Keep in mind their current market cap is 12.3 Billion)72% towards regulated utility projects with the remaining 28% towards renewables.

That is a massive amount of growth in a relatively short amount of time. That being said management continues to reiterate their commitment to growing that dividend 10% annually through 2021. With their low payout ratio of 59.6%, they should be able to continue growing that dividend after that.

Putting Cash to Work

So we got a stock in the green energy sector, one of the highest growing dividend’s in the utility space ( 9 year streak – with a 5 yr growth rate @ 9.8%) a decent price, 5% drip discount and a tonne of growth on the horizon..

Things are looking great. So we decided to add 51 more shares of Algonquin Power to our portfolio at 20.44 the other day. I have been targeting to add under 20 but don’t see that happening at the moment.

These 51 shares will add 31.64 usd to our forward income and combined with our previous holdings will most likely add another dripped share each quarter. Got to take advantage of that 5% discount!

Conclusion

Not a monster addition to algonquin power this month, but December has been a super expensive month. Soo many yearly renewals and high costs came up – union fees, caa, car repair, Christmas, ice rink, scouts, website etc etc

Ahhh well we are all still healthy and smiling. What more can you ask for? Do what you can to grow that income but life comes first and I don’t wanna pay no interest on those credit cards! haha

cheers Everyone and Have a very Merry Christmas if I don’t post before than.

Ho Ho Ho!

10 Responses

  1. Matthew says:

    Great buy Rob, I’ve owned Algonquin for a few years now and don’t plan on selling anytime soon. Happy Holidays!

  2. Good buy. Renewables are the future and as Greta Thunberg says, “Change is coming whether you like it our not”.

    I never owned Alqonquin directly. Emera had a big stake in the company a few years back, so I had exposure to it that way.

    • Rob says:

      hey Pursuit

      Greta is great to see, makes you think individuals can actually change the world.
      There is soo many great Canadian utilitys.
      cheers

  3. PCI –

    Nice job adding to a current position, at what appears to be decent values. Keep that dividend train moving.

    -Lanny

  4. German says:

    Great buy! I like this company. I started buying into it this summer. The stock price is fairly valued at the moment. You will need to add more before it doubles like NPI.

  5. May says:

    I have added 300 shares of AQN in September when it’s under $18. Kicking myself not having bought more. I have this bad habit looking to buy stocks at shares although 100 shares of FTS actually equal to almost 300 AQN. So I end up with too many FTS and too little AQN. Considering to buy more AQN as I agree with you among green energy stocks, AQN seems to be the only stock whose price is still reasonable.

    By the way, I saw you were forced to sell Emera when during a lockdown you cannot work. Have you ever thought about having a HELOC to be your emergency fund? I am mortgage free now but keep a HELOC so that I can easily access some money if necessary.

    • Rob says:

      hey May

      Yeah I always kick myself when I thought of adding more and didnt and price climbs. ie microsoft =)

      At one point we did look at opening a heloc to take advantage of the market if it dipped. For some reason we stopped moving forward with it. Would be good to have a stack of cash if things really drop.

      We still have like 6k cash sitting in our chequing account, I feel that’s sufficient but we are in lock down yet again so who knows. At least me and the wife can still work this time.

      Taker easy May!
      cheers

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