Hydro One Ltd. Benefits From Rising Demand Across Canada’s Largest Province

Hydro One Ltd. should benefit from strong regulatory tailwinds in the form of ongoing Ontario Energy Board-approved essential infrastructure investments.

A Member of Pat McKeough’s Inner Circle recently asked for his advice on Ontario’s biggest electricity transmission and distribution utility.

Pat likes the firm’s dominant position in the province’s essential electricity infrastructure, strong quarterly earnings growth, consistent dividend growth, and massive tailwinds from a projected 75% electricity demand growth through 2050. However, Pat notes that caution is warranted due to the stock’s current high valuation as well as the risk that increasing capital requirements for grid modernization could lead to funding pressures or potential dilution.

Hydro One Ltd. (Symbol H on Toronto; www.hydroone.com) is Ontario’s largest electricity transmission and distribution utility.

Through its wholly owned Hydro One Inc., the company operates almost all of Ontario’s electricity transmission network. That translates into 30,000 kilometres of high-voltage transmission lines and about 125,000 kilometres of primary low-voltage distribution lines.

Hydro One delivers electricity to about 1.5 million residential and commercial clients across the province. Those customers include large industrial companies and municipal utilities.

The company has three segments:

The Transmission segment accounts for about 92% of Ontario’s transmission capacity. This business is rate-regulated. That means the Ontario Energy Board (OEB), a regulatory body, sets the prices Hydro can charge.

The Distribution business is the largest in Ontario. It, too, is rate-regulated. It earns revenue mainly by charging distribution rates approved by the OEB. Plus, it charges amounts to recover the cost of purchased power.

The Other segment is mostly made up of Hydro’s telecommunications business. It provides support for the company’s transmission and distribution businesses.
[ofie_ad]

Hydro One recently expanded its transmission ownership in northern Ontario. Specifically, on December 19, 2024, the company said it has agreed to pay the Ontario Municipal Employees Retirement System (and Enbridge Transmission Holdings Inc.) $257.4 million in cash for a 48% stake in the East-West Tie Ltd. partnership.

East-West Tie Line is a 450-kilometre, 230-kilovolt transmission line, running from Wawa, Ontario, to Thunder Bay, along the north shore of Lake Superior. It connects northwest Ontario communities and industries to Ontario’s electricity grid.

A consortium of six First Nations and affiliates of NextEra Energy Canada LP own the remaining interest in the partnership. The line has an OEB-approved rate base of about $880 million. The rate base is the amount of money that the Partnership has invested in the Line. It’s used to calculate the utility’s allowed rate of return, or profits.

Consistent dividend growth is backed by rising earnings

For the three months ended June 30, 2025, Hydro’s revenue rose 1.7%, to $2.07 billion from $2.03 billion a year earlier. Hydro earned $327 million, or $0.54 a share, in the quarter. That was up 12.0% from $292 million, or $0.49 a share.

Note—the company raised its quarterly dividend by 6.0% with the June 2025 payment, to $0.3331 a share from $0.3142. The stock now yields 2.8%.

Hydro’s shares trade at a relatively high 23.0 times the company’s 2025 earnings estimate of $2.10 a share.

Recommendation in Pat’s Inner Circle: Hydro One Ltd. is okay to hold.

Copy
Link copied
Email
Print

Pat McKeough

A professional investment analyst for more than 30 years, Pat has developed a stock-selection technique that has proven reliable in both bull and bear markets. His proprietary ValuVesting System™ focuses on stocks that provide exceptional quality at relatively low prices. Many savvy investors and industry leaders consider it the most powerful stock-picking method ever created.

Find 5 Safe Stocks to
Buy & Hold for Long-Term
Growth and Steady Income

No Credit Card Required

SEND ME THIS FREE REPORT

Testimonials

The cornerstones of Pat’s strategy–value, diversification and timelines–make his newsletter, The Successful Investor, highly profitable while minimizing risk. His advice is no-nonsense, down-to-earth and based on solid research. You’ll know what to invest in and what to avoid.

Chuck Chakrapani, PhD
Investors Association of Canada
The older I get the better dividends look. For retirees and would-be retirees who want to sleep at night, I can’t think of a better source of information on reliable growing dividend income than Pat McKeough’s newsletter, Dividend Advisor.

Jonathan Chevreau
Financial Post Columnist
As a manager of more than $500 million in mutual funds, I have access to the best brokerage research available in this country. But I still take time to read Pat McKeough’s premium newsletters

John Sartz
I appreciate the 25 years of above market returns I received by following your advice. at least 95% of my investment decisions were based on TSI recommendations.

Chuck J.
Subscriber since 1996. Inner Circle Member Since 2006
The newsletters I receive in Inner Circle Pro are fantastic! I have been following Pat’s advice for years and everything he has said has been amazing. His commentaries are brilliant, insightful, educational, rational and balanced. My returns are almost double the TSE and I have referred many of my friends who have switched over to your services.

Walter H.
Inner Circle Pro subscriber

Free Reports

5 Best Stocks to Buy This Month

The Successful Investor Approach to AI Investing

7 Winning Strategies for Dividend Investors

The Best Blue Chips for Canadian Investors

The ETF Investor’s Handbook

The Canadian Guide on How to Invest in Stocks Successfully

Power and Profits of Energy Stocks

Juniors to Giants: The Complete Guide to Mining Stocks

How to Find the Best Growth Stocks

7 Pro Secrets to Value Investing

Browse Topics

Blue Chip Stocks

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

Dividend Stocks

Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

Value Stocks

What are value stocks?

One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

Growth Stocks

Growth stocks are companies that are likely to have sales and earnings growth well above market average. Frequently they pay few, if any, dividends. Instead they typically reinvest any extra cash flow to promote further growth. Chosen wisely—according to Pat McKeough’s advice—high-quality growth-oriented stocks can be worthwhile additions to most well-diversified portfolios.

ETFs

What are ETFs?

ETF is an acronym for exchange traded fund.. These exchange traded funds are used to track indexes as closely as possible, since investors cannot actually buy an index outright.

How To Invest

Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice to beginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.

Wealth Management

Wealth management is the practice of putting your savings to work so that it continues to grow over your lifetime and will also benefit your heirs. Wealth management encompasses many different areas of investing like long term investment planning and retirement planning.

AI Investing

Artificial intelligence (AI) is essentially the merging of today’s big computing with big data. This has resulted in breakthroughs in everything from creating machines to recognize faces with more accuracy than a human, to the development of chatbots able to collect, organize and simplify all the Internet has to say on any topic.

Spinoffs

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a corporate subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors.

Penny Stocks

A penny stock in general trades for under five dollars a share, and as the name implies, sometimes for pennies. Most of the time they’re young companies, or start-ups in speculative markets like mining or technology.

Mining Stocks

Mining stocks are investments in companies that produce or explore for minerals. Some of these minerals include uranium, coal, molybdenum (which is used in steelmaking), copper, silver and gold. They are affected by fluctuating commodity prices in addition to their own business and operating risks.

Energy Stocks

What are energy stocks?

Businesses that work in the extraction, refining and delivery of energy sources such as natural gas, oil, uranium and coal, are considered energy stocks.