Hydro One hits new highs

Hydro One was created from the old Ontario Hydro in 2015. It has two main businesses: the transmission of electricity and the distribution of electricity to utilities throughout the province. Overall, it transmits 98% of Ontario’s electricity and serves 1.5 million customers. The province owns 47% of the common shares.

The stock continues to nudge record closes and is up 20% year-to-date at the time of writing.

In its latest quarter, Hydro One showed strong revenue and profit growth as Ontario Energy Board approved rates made themselves felt. There was also stronger peak demand for energy. Net earnings of $421 million was 13.5% higher year-over year. Earnings per share of $0.70 climbed 12.9%. Revenue of $2.23 billion was 5% higher.  

 Shareholders received a 6% dividend increase with the May payment, bringing the quarterly dividend to $0.33. It yields 2.51% at current prices.

Hydro One is a core holding for conservative investors. It offers slow, steady growth and a rising dividend. It is insulated from commodity price changes since it transmits electricity but does not generate it. In a year of global political and economic disorder it has had a good run and carries a relatively high price to earnings ratio of 25. Its outlook is good, but short term capital appreciation may be more moderate.

This article appeared in a recent issue of the Income Investor.  For information on how to reprint this article please view this page.