RBC 2 RBC Capital Markets analysts Robert Kwan and Maurice Choy are bullish on Canada’s Energy Infrastructure sector, believing it offers investors “multiple ways to gain low-risk exposure to North America’s multi-year energy growth that lies ahead.”
“We particularly favour the Canadian Midstream stocks as we believe that the WCSB’s natural gas, NGL and oil volume growth outlook through 2030 remains unaffected by the recent low commodity prices,” they added. “Moreover, we like Midstream’s progressively healthy financial setups, relatively sound capital allocation philosophies, and increasingly disciplined approach to risk management. If investors are concerned with a slowing economy, the Utilities stocks are solid options, with their low-risk, regulated earnings remaining the bedrock of the sector’s decades-long defensive attributes (not to mention the Utilities’ energy transition-driven growth opportunities and rising electricity demand backdrop). The Alberta Power companies are also well-positioned to serve the province’s growing power needs, particularly as data centre load growth emerges. Big picture, Midstream and Utilities’ dividends are sustainable and set to grow, with the 5.0-per-cent average dividend yield likely being attractive to income-oriented investors amid today’s interest rate environment.”
In a research report released on Thursday titled Success is all about consistency around the fundamentals, the analysts argued “there is something for everyone” in sector.
“As the Canadian Energy Infrastructure sector’s investor base can often have differing macro and energy outlooks, we believe the sector’s wide range of businesses offer the market a solid set of stocks that fit the various outlooks,” they said. “As we roll out our 2026 estimates and update certain price targets , we continue to prefer Canadian Midstream, which is underpinned by the transformational WCSB volume growth through 2030, as well as the companies’ financial setups, capital allocation approaches and risk aversion. Any material share price weaknesses that stem from the low commodity price should be viewed as a buying opportunity, in our view. Importantly, Utilities remains the destination for defensive exposure, while an ideal situation for the Renewables (covered by RBC Capital Markets analyst Nelson Ng) involves: (1) certain elections outcomes; (2) economic conditions that lead to better labour availability, lower inflation, and a change in investor sector allocations; and (3) more interest rate cuts.”
With the introduction of their 2026 projections, Mr. Choy increased his target prices for many of the stocks in his coverage universe:
- AltaGas Ltd. (outperform”) to $40 from $37. The average on the Street is $37.88.
- Atco Ltd. (“sector perform”) to $50 from $47. Average: $45.08.
- Canadian Utilities Ltd. ( “sector perform”) to $38 from $36. Average: $36.20.
- Emera Inc. ( “outperform”) to $60 from $57. Average: $53.55.
- Enbridge Inc. (“outperform”) to $59 from $55. Average: $55.59.
- Fortis Inc. ( “sector perform”) to $65 from $62. Average: $60.19.
- Gibson Energy Inc. ( “outperform”) to $28 from $27. Average: $25.09.
- Hydro One Ltd. ( “sector perform”) to $43 from $41. Average: $44.
- Keyera Corp. (“outperform”) to $45 from $44. Average: $41.36.
- Pembina Pipeline Corp. ( “outperform”) to $65 from $60. Average: $58.43.
“We prefer Pembina, Keyera, and TC Energy on Midstream; and AltaGas, Emera, Brookfield Infrastructure and TransAlta on Utilities and Alberta Power,” the analysts said.