Hydro One Ltd
🇨🇦 H.TO · Toronto · CA4488112083
Utilities
CAD 58.25 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
26.1
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 58.25 ÷ 2.23 = 26.1
TTM period through: 2025-12-31
Forward P/E (estimated): 25.6
Based on analyst estimates
Reference: Provider P/E (Trailing): 26.1
Yield (Fwd)
2.28%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 2.27%
Net Debt/EBITDA (TTM)
5.6x
Latest quarter: 25.8x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2025-12-31
Latest quarter (2025-12-31): 25.8x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (Fwd)
59.7%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Announced dividend / actual earnings (TTM)
Payout (TTM): 58.9%
Cash Flow Payout (TTM): 29.2%
FCF Coverage (TTM): -0.35x
ROE
10.8%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
16.6x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
Summary
Hydro One is a premier Canadian utility operating as a regulated natural monopoly over Ontario's electricity network, providing exceptional long-term stability and earnings visibility. While the underlying business quality is outstanding and recent management transitions appear orderly, the current premium valuation (P/E 26) and low yield (2.27%) offer limited upside. Existing shareholders should maintain positions given the immense moat, but new investors may want to wait for a meaningful pullback closer to historic utility multiples before initiating positions.
Sector Context
Hydro One functions as the dominant electricity transmission and distribution provider in Ontario, Canada, effectively operating as a regulated natural monopoly. In dividend investing, regulated utilities are highly prized for their predictable, inflation-linked revenues and captive customer bases, though investors must accept higher baseline debt levels and frequent negative free cash flows due to the massive infrastructure investments required.
📊 Strategy Analysis
- • Operates as a highly resilient regulated natural monopoly controlling Ontario's electricity transmission network, offering exceptional earnings visibility.
- • Consistent track record of business fundamentals, with revenue growing 38% over the last decade and EPS expanding at a 6.8% 5-year CAGR.
- • Earnings-based payout ratio remains very healthy at 59.7%, sitting squarely within the strategy's ideal 40-70% sweet spot.
⚠ What to Watch
- • Valuation is significantly stretched with a TTM P/E of 26.13, trading well above the strategy's target range and the estimated monopoly fair value limit of $44.58 CAD.
- • Current dividend yield of 2.27% falls short of the 3% minimum threshold desired for optimal income generation.
- • Net Debt/EBITDA is elevated at 5.57x, and negative free cash flow coverage (-0.35) reflects the heavy ongoing capital expenditure burden.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-04-04
Disclaimer: This information is for educational purposes only. Not financial advice.