Hydro One wins “Buy” rating at Desjardins

Desjardins Securities analyst Brent Stadler likes what he sees from Hydro One (Hydro One Stock Quote, Chart, News, Analysts, Financials TSX:H).

As reported by the Globe and Mail. Stadler May 6 initiated coverage of H with a “Buy” rating and price target of $58.00.

He says there are many reasons to like Hydro One, particularly in this environment.

“We believe H has best-in-class defensive attributes as well as best-in-class offensive attributes,” the analyst wrote. “Given utilities have historically performed best during times of uncertainty and volatility, we believe investors should migrate to quality when seeking safety—therefore, H is our preferred utility name. H’s strong balance sheet (rated A (Stable)), low payout ratio (64 per cent vs peers at 85 per cent) and predictable, stable earnings profile with the potential for upside under the five-year joint rate application (JRAP) provides strong defensive attributes. Its largely self-funded growth model, peer-leading EPS growth (7.4-per-cent under the current JRAP; we forecast 8.0 per cent over the next JRAP) and 6-per-cent annual dividend growth provide attractive offensive attributes. While we acknowledge that H trades at a solid premium to peers (23.0 times vs 17.7 times), we believe this is warranted given its execution track record, lower risk profile and positive outlook.”

At press time, shares of Hydro One were up 0.7% to $52.80.