Canada’s Best Utility Stocks to Buy for March 2025

Key takeaways

Utilities Offer Stability and Income: Canadian utility stocks like Fortis and Hydro One are reliable choices for investors seeking steady cash flow and consistent dividends, especially in uncertain economic times.

Renewable Energy is the Future: Companies like Brookfield Renewables and Capital Power are leading the shift toward green energy, positioning themselves for long-term growth as global clean energy adoption accelerates.

Regulated Models Drive Predictability: The heavily regulated nature of utilities provides predictable revenues and makes them resilient against economic downturns, but interest rates and government policies remain key factors to monitor.

3 stocks I like better than the ones on this list.

With interest rates declining, many utilities are nearing 52-week highs after multi-year slumps. Although one could say the best time to buy the top Canadian utility stocks was when rates were at their peaks and prices were nearing 52-week lows, there is certainly still opportunity here.

The best utility stocks typically operate in a highly regulated environment, providing consistent revenues that lead to fewer surprises. In the end, this lowers the overall volatility of Canadian utility stocks, an element that is overlooked when it comes to an investment portfolio.

Lets go over some of the best utility stocks in Canada today. Keep in mind, these stocks are in no particular order.

Reliable, dividend-focused utility giant

Fortis (TSE:FTS)

Fortis is one of North America’s largest utility companies, with operations spanning electric and gas distribution systems. Its core business revolves around regulated utilities, offering stable and predictable earnings. Fortis serves millions of customers across Canada, the U.S., and the Caribbean, and it has become a favorite among dividend investors for its steady growth and commitment to payouts.

P/E: 17.7

5 Yr Revenue Growth: 5.7%

5 Yr Earnings Growth: 2.8%

5 Yr Dividend Growth: 4.9%

Yield: 4.1%

  • Stable Revenue Base: With 99% of its assets regulated, Fortis enjoys consistent and predictable cash flows.
  • Dividend Growth Leader: It boasts a nearly 50-year history of consecutive dividend increases, making it a Dividend Aristocrat.
  • Defensive Nature: Utility stocks like Fortis tend to perform well during economic downturns.
  • Expansion into Clean Energy: Fortis is investing heavily in renewable and clean energy infrastructure.
  • Strong Geographic Diversification: Operations in several jurisdictions reduce the risk of region-specific regulatory challenges.
  • Attractive Yield: Fortis offers a competitive yield, appealing to income-focused investors.
  • Rate Case Approvals: Regulatory approvals for rate increases will directly impact revenue growth.
  • Renewable Investments: Fortis plans to spend billions on green energy projects, a critical part of its growth strategy.
  • Debt Management: As a capital-intensive company, its ability to manage debt in a rising rate environment is crucial.
  • U.S. Expansion: Monitor how its U.S. operations grow, as they account for a significant portion of revenues.
  • Regulatory Challenges: Heavy dependence on regulatory bodies means unfavorable rulings could hurt earnings.
  • Rising Interest Rates: Higher borrowing costs may pressure its profitability given its significant debt load.
  • Currency Risks: Exposure to U.S. operations could lead to forex volatility impacting results.
  • Slower Growth Potential: As a mature utility, Fortis may offer lower growth than smaller, high-growth peers.

High-growth, clean energy-focused utility

Capital Power (TSE:CPX)

Capital Power operates a mix of natural gas, coal, and renewable power facilities across North America. It has been shifting aggressively towards renewable energy, with a goal to achieve net-zero emissions by 2050. Known for its strong project pipeline, Capital Power offers both growth and income potential for investors.

P/E: 15.0

5 Yr Revenue Growth: 25.1%

5 Yr Earnings Growth: 22.8%

5 Yr Dividend Growth: 6.7%

Yield: 4.1%

  • Aggressive Clean Energy Transition: A clear focus on renewables positions the company for future growth.
  • Above-Average Dividend Yield: Offers a higher-than-average yield compared to peers.
  • Strong Project Pipeline: Numerous projects under development promise future revenue growth.
  • Inflation-Resilient Revenue: Contracts with inflation-indexed pricing support earnings stability.
  • Operational Diversification: Assets across Canada and the U.S. reduce geographic risk.
  • Growth-Oriented Management: Clear plans to invest in and expand clean energy assets.
  • Coal Phase-Out Progress: Watch its success in transitioning from coal to renewables, critical for ESG-focused investors.
  • Government Incentives: Policies supporting renewable energy could accelerate its clean energy shift.
  • Project Execution: Timely completion of its green energy projects is essential for growth.
  • Electricity Demand Trends: Growing power demand in North America directly supports its revenue potential.
  • Data Center Demand: Capital Power is one of the main beneficiaries of extensive data center demand, particularly in Alberta. Any changes in the forward outlook of total demand will impact its price.
  • Execution Risk: Delays in renewable project rollouts could impact growth targets.
  • Commodity Price Exposure: Power prices can be volatile and affect profitability.
  • Capital Costs: Building renewable facilities is expensive, and cost overruns could hurt returns.
  • Debt Levels: Rising debt for expansion may weigh on its balance sheet if rates stay high.

Ontario’s electricity distribution powerhouse

Hydro One (TSE:H)

Hydro One owns and operates the vast majority of Ontario’s electricity transmission and distribution system. Its operations are entirely regulated, providing stable and predictable cash flow. The company benefits from a near-monopoly in its service area, serving homes, businesses, and industries across the province.

P/E: 23.3

5 Yr Revenue Growth: 5.0%

5 Yr Earnings Growth: -%

5 Yr Dividend Growth: 5.1%

Yield: 2.8%

  • Regulated Monopoly: Hydro One dominates electricity transmission in Ontario, offering reliable revenues.
  • Stable Dividends: Its regulated business model supports consistent payouts to shareholders.
  • Resilient Business Model: Electricity demand is steady, even during economic downturns.
  • Cost Control Improvements: Recent operational efficiencies have improved its bottom line.
  • Low Volatility: Hydro One is less exposed to economic swings, making it a defensive play.
  • Provincial Growth: Ontario’s growing population will drive electricity demand higher.
  • Population Growth in Ontario: More people mean higher electricity usage, benefiting Hydro One.
  • Infrastructure Investments: Aging infrastructure replacement will be a key growth driver.
  • Government Oversight: As a partially government-owned entity, political decisions can influence operations.
  • Rate Decisions: Regulatory approvals for rate adjustments directly impact its earnings potential.
  • Regulatory Risk: The Ontario Energy Board’s rulings could limit rate increases.
  • Limited Growth Opportunities: As a fully regulated utility, Hydro One lacks significant expansion prospects.
  • Government Intervention: Its semi-government status could result in political interference.
  • Debt Dependence: Significant debt for infrastructure upgrades could become a challenge in a high-rate environment.

Global leader in renewable energy

Brookfield Renewables (TSE:BEP.UN)

Brookfield Renewables is one of the largest renewable energy platforms globally, with a portfolio spanning hydro, wind, solar, and storage facilities. It operates across multiple continents, generating stable cash flows from long-term power contracts. Brookfield is known for its ability to acquire undervalued assets and develop renewable infrastructure, making it a favorite for ESG investors.

P/E:

5 Yr Revenue Growth: 5.8%

5 Yr Earnings Growth: -%

5 Yr Dividend Growth: 0.7%

Yield: 6.9%

  • Global Diversification: Assets across North America, South America, Europe, and Asia reduce reliance on one market.
  • Massive Growth Potential: Strong tailwinds from the global renewable energy push.
  • Inflation-Protected Revenue: Long-term contracts often include inflation-linked price adjustments.
  • Strong Sponsor Backing: Backed by Brookfield Asset Management, which provides financial stability.
  • ESG Focus: Increasing demand for clean energy investments enhances its attractiveness.
  • Robust Acquisition Strategy: Proven ability to find and grow undervalued assets.
  • Global Renewable Energy Policies: Supportive government policies worldwide are a tailwind.
  • Hydro Power Expansion: Hydro facilities remain a key growth area within its portfolio.
  • M&A Activity: Keep an eye on its acquisitions, which have been a major growth driver.
  • Technological Advancements: Innovations in energy storage and efficiency could boost profitability.
  • Currency Exposure: With global operations, forex fluctuations could impact results.
  • Regulatory Changes: Shifts in renewable energy policies could affect future returns.
  • Capital Intensity: Building and acquiring renewable projects requires heavy upfront investments.
  • Market Competition: Increasing competition in renewables may pressure margins over time.

Canadian utility stocks are often outstanding dividend stocks

These companies are established and have solid roots implanted in the industry. As such, they can reward shareholders in dividends, at least more so than high-potential growth stocks.

Don’t get me wrong; plenty of Canadian stocks in the utility sector provide growth, primarily with renewable energy. But if you’re looking for some stocks to build out the foundation of your portfolio, the stocks above are certainly a good starting point.

Are Canadian utility stocks a good investment?

Utility companies primarily deal with electric transmission, electricity generation, and energy infrastructure. For this reason, their cash flow is considered highly reliable. Why?

Well, everyone needs electricity. Next to heat, it’s probably one of the last utility bills we’d ever let go unpaid. As a result, utility stocks will more than likely form the core of many investors’ portfolios.

When times get rocky, and the market gets volatile, they’ve proven capable of weathering the storm. Look no further than the 2022 bear market, in which a company like Fortis had substantially lower drawdowns than the index. And as such, we’d view them as great investments in any economic circumstances.

There is one thing to know about most utilities, and that is the fact that they typically carry a lot of debt on the balance sheet. As a result, financial results can be put under pressure during periods of high interest rates.

However, as with many companies on the stock market, returns are made over the long term, and if you buy a strong utility company, it will come out of the situation just fine.

Are there strong Canadian utilities ETFs?

Right now, there are two primary ETFs when it comes to Canadian utilities. The iShares S&P/TSX Capped Utilities Index ETF (TSE:XUT) and the BMO Equal Weight Utilities Index ETF (TSE:ZUT).

BMO does have a covered call variant that utilizes a call option strategy to push out more income for its holders. This ETF trades under the ticker ZWU.

Its performance has been relatively poor over the years, and I feel that utilities provide more than enough income for investors that they shouldn’t need to seek out added strategies that limit the upside.

Alternatively, Hamilton does have a leveraged utility ETF, the Hamilton Enhanced Utilities ETF (TSE:HUTS), which could be a solid option for those who are bullish utilities and willing to add some leverage.

Are Canadian utility stocks without risk?

For the most part, investors get a little bit too comfortable when selecting a utility company for their portfolio. Look no further than utility stock Algonquin Power (TSE:AQN).

Despite 70%~ of its business being regulated utilities, the company’s over-exposure to floating rate debt and extensive acquisition strategy caught up to it in 2022.

With the Bank of Canada and the Fed stating that rates would stay low for the foreseeable future, this was difficult to predict.

However, with the change in direction from policymakers and the fastest increase in rates in history, Algonquin was forced to cut the dividend numerous times, sell off its renewable portfolio, and overhaul management.

This shows that even reliable, cash flow-generating assets like regulated utilities are not without risk.

Overall, Canadian utility stocks are a great sector to build a core portfolio around

The regulated nature of the utility sector makes them outstanding investments during practically any economic circumstances.

Yes, there are plenty of other options for Canadians to choose from like Canadian Utilities Ltd (TSE:CU), Atco Energy (TSE:ACO.X), or even Emera (TSE:EMA), but this should at least give you a head start on your search in finding the best utility company that fits with your portfolio and risk tolerance.

I believe every portfolio should have a couple of these stocks, additions to what I call the “foundation” portion of your portfolio.

Those stocks you simply set and forget. In environments like this, you want to own businesses that have zero chance of shutting down. Think of stocks like Fortis, Dollarama, or even grocery store stocks like Loblaws.

I’ve owned Fortis for more than a decade now, and there is nothing better than having a stock sitting in your portfolio paying you reliable dividends with little effort on your part, even when the stock markets get rough.

These aren’t going to be world-beater in terms of total returns or growth potential, but we can reserve that for other portions of our portfolio.

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