This will be a short and sweet e-mail this week as well, as we are releasing our 2023 US Foundational Stocks with the bulk of the details being inside of the release itself.
There is a new addition this year, as we’ve added a stock we’ve kept a close eye on all year to the list. So, there is now ten US Foundational Stocks in 2023.
Before we drop the link to the release, here are a few important details:
- We are still in the process of grabbing Key Performance Indicator information. So, these tables are not available yet, but we will update you as to when they are.
- The recent earnings sections will be empty. This is because we are coming up to earnings season, and putting last quarters information in wouldn’t serve much purpose. You will see those sections populate when the company files earnings. For example, Blackrock’s will be filled in as they just reported.
- 7 out of 10 of these stocks are available via CDR, meaning you do not have to exchange currencies to buy them, unless you want to own USD of course.
You can click here to read our list of US Foundational Stocks for 2023
An update on Algonquin Power (AQN)
We felt that with the popularity of Algonquin Power here in Canada and among Premium members we should fill people in with that went on at the company’s most recent investors day.
Of note, I (Dan) sold my Algonquin Power position after I took in the investors day. Mat still owns Algonquin Power, but is looking for a possible exit point.
The dividend was cut by 40% as the company needs to focus on improving the balance sheet and de-leveraging. The dividend cut was expected. However, what caused me to ultimately move on from the company was yet another downgrade to earnings guidance.
Prior to the entire situation with Algonquin, the company had stated lower end earnings per share guidance in excess of $0.70 per share. As of its investor day, it has reduced the lower end of its guidance to $0.55. This is a near 22% reduction in earnings expectations.
On top of the severe reduction in earnings guidance for two straight releases now, the company is continuing to sell off renewable assets to pay down debt. One of the primary thesis’s for owning Algonquin was its renewable energy exposure resulting in outsized growth. The company is now in a position where it must sell off assets to pay down debt and increase financial flexibility, which will ultimately impact earnings growth, and thus dividend growth.
Is there room for a contrarian buy right now? Potentially. We’ve witnessed many utilities over the years come back after a dividend cut. Look no further than Altagas, which cut its dividend in 2018. If you bought the company at the bottom during its issues at that time, you’d be sitting on a gain of nearly 100% right now.
However, in our opinion in order for Algonquin to realize a turnaround like this, it would need interest rates to go down to relieve pressure from its debt. As of right now, there are more indications that rates will continue to go up, not down. And how long they will stay high for is anyone’s guess.
We just feel there are better, more efficient operators in the utility space right now. I will personally be directing any money I want to invest in the utility sector to Fortis or Brookfield Renewables.
