Good morning, this morning I decided to switch things up a bit. One of my main goals this year is to create a better and more consistent dividend growth portfolio. Utilities have really pulled back recently on the rate hike news. I have really wanted to get into either fortis or Canadian utilities.
One of the biggest things I kept thinking about was I didn’t want to own 4 different utilities. I already own Hydro One, Algonquin power and Brookfield renewable. As you can see all three of those companies don’t have the track record of either fts or cu. So I decided to sell one position and reinvest that money into the new purchase.
For the 2nd time now, (yes I know, kinda dumb) I decided to sell hydro one. It really has had no growth, but is in the process of a nice acquisition. Could this add a bunch of growth to hydro one? Yeah I would think so. One of the main reasons I like hydro one is I’m a customer and they basically have a monopoly in Ontario. The biggest downfall (which I originally thought was a good thing) is the government. They own 47.4% of hydro one, with the goal of owning only 40%.
The problem is the public loves to complain about hydro rates. Since the government wants their votes, they generally force hydro one to lower rates. That’s a big reason hydro one wants to expand south of the border. I really started to hate the political aspect of this stock. Whats going to happen when the conservatives come into power? They were against the liberals selling hydro one.
Besides, I already am going to get a pay cheque from hydro one now. The solar panels are officially 100% done. The power generation hasn’t been that good though, with all this snow on them. 45 kw so far (which is only 13 bucks) – since December 27th.
I decided to sell our whole position in Hydro one for a loss of about 40 bucks. This wiped out $177.76 in forward dividends. Hydro one has a p/e ratio over 20 while cu and fts are around 17 after the recent dip.
So which stock did we start a new position in?
It was a hard debate between Fortis and Canadian Utility. Cu has a 46 year record of raising dividends while Fts is right behind at 44. Here’s some Comparisons of both currently.
- P/e 17.6
- Yield – 3.87%
- 8.02 % higher than 52 week low
- 9.7% lower than 52 week high
- 10 yr avg div growth rate – 7.1
- Drip discount 2%
- Market Cap – 18.47 billion
- The stock price has went up 36.38% in the last 10 years
- P/e 17.6
- Yield – 4.38%
- 0.64 % Above 52 week low
- 15.62 % lower than 52 week high
- 10 yr avg div growth rate – 8.6
- Drip Discount 2%
- Market Cap – 9.7 billion
- The stock price has went up 60.97% in the last 10 years
Originally I had it in my head to buy Fortis, but as you can see Canadian Utilities currently seems like the better buy. They are better in almost every category. The 10 year stock price increase surprised me the most. Fortis averaged a return on investment of 7.5% a year, while cu was over 10% the last 10 years (based on stock appreciation and the dividend).
We purchased 153 shares of Canadian Utility with the proceeds of the sale and an additional $1000.
This purchase will add $240.69 in forward dividends, but since I sold Hydro one the difference is only $62.93. I’m happy to switch up the 2 companies, since Canadian Utilities has a fantastic track record and is basically a set it and forget it stock. While Hydro One tends to be a political chess piece at the moment.
This is my first move with our stocks to create a better dividend growth portfolio. I now think my 3 utilities are pretty solid with Canadian Utilities, Algonquin and Brookfield Renewable. While I don’t think you can really go wrong with either fortis or Canadian Utilities, I’m curious what your thoughts are. What do you think? Should I of bought fortis instead?
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.