Altagas Ltd. (TSX:ALA) is a TSX stock that pays an annual dividend of $1.26 per share, provides stability through its regulated utilities, and provides growth in its midstream energy business. These types of stocks offer strong upside potential and downside protection, which I think suits a retirement portfolio exceptionally well.
Here’s why I think Altagas could be a great addition to your retirement plan.
Consistency and predictability
Altagas is a leading energy infrastructure company operating in two segments: the utility segment and the midstream segment.
The utilities industry is a predictable, steadily growing business supported by regulated contracts. This ensures a smooth, consistent cash flow profile. In the company’s latest quarter, the utility performed well, with earnings before interest, taxes, depreciation, and amortization (EBITDA) rising 10% to $134 million. This was driven by modernization investments, improved asset optimization and colder weather.
The outlook for the utility segment is good as demand for all forms of energy increases in the US, with natural gas being critical to meeting these long-term energy needs. This demand comes from the closure of coal-fired power stations, data centers and increased industrial activity. In fact, artificial intelligence (AI) and demand for data centers are expected to increase natural gas demand in 2030 and beyond.
Global markets offer a path to significant growth
The midstream segment is Altagas’ faster growing business. In the last quarter, this segment posted a 23% increase in EBITDA to $215 million. This was due to record export volumes and strong margins.
Even in this higher growth segment, Altagas is focused on reducing the company’s risks. A focus on long-term contracts means lower margins, but the benefit is greater stability, a trade-off the company is happy to make.
Altagas continues to make progress on its major growth projects in the midstream sector, with the two major projects expected to be completed in late 2025 and 2026. In the meantime, Altagas continues to benefit from strong Asian demand for liquefied petroleum gas (LPG). In fact, the company expects this demand to increase by 30% by 2030.
Strong past and future shareholder return profile
Since 2018, Altagas’ earnings per share (EPS) has grown at a compound annual growth rate (CAGR) of 14%. Additionally, the annual dividend per share increased at a CAGR of 4% to $1.26. Finally, Altagas shares generated a total return (dividends plus capital growth) CAGR of over 20%.
Altagas’ current dividend yield is a respectable 3%. The bullish macro environment in both segments of the company will lead to further dividend increases and additional returns for shareholders.
The bottom line
A share like Altagas has an attractive risk-reward profile. This means that the benefit is high without running too much risk. The certainty comes from Altagas’ utility segment and the way the company structures its midstream segment. The upward force comes mainly from the middle segment, where global demand is growing strongly.
A TSX stock with this type of investment profile is ideal for investors, especially for retirement portfolios.
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