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What are we looking for?

Sustainable dividends from power utilities set to gain from any interest rate drop spurred by today’s falling inflation.

The screen

Subsiding inflation in both Canada and the United States bodes well for consumers – not just in terms of prices for goods and services but also as a harbinger of lower interest rates.

Another big beneficiary of lower inflation – and so lower rates – is the utilities industry. High capital spending means that utilities, including power providers, carry equally high levels of debt. Lower rates make it easier for them to raise money and refinance existing debt loads. Falling interest rates also make it easier for high-yield utilities to compete with fixed-income products for investors’ money.

With this search, we’re looking for power generators with sustainable growth and dividends. Our TSI Dividend Sustainability Rating System awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five.
  • Two points if it has raised the payment in the past five years.
  • One point for management’s commitment to dividends.
  • One point for operating in non-cyclical industries.
  • One point for limited exposure to foreign currency rates and freedom from political interference.
  • Two points for a strong balance sheet, including manageable debt and adequate cash.
  • Two points for a long-term record of positive earnings and cash flow to cover dividends.
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Power companies with significant growth prospects

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Bil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1Emera Inc.EMA-THighest104.715.9-7.058.75
2Fortis Inc.FTS-THighest103.729.7-4.161.36
3Alliant Energy Corp.LNT-QHighest103.313.7-5.055.16
4Ameren Corp.AEE-NHighest102.823.3-3.389.80
5Capital Power Corp.CPX-TAbove Average95.05.35.646.32
6Canadian Utilities Ltd.CU-TAbove Average94.610.70.239.30
7ATCO Ltd.ACO-X-TAbove Average94.25.1-3.445.20

Source: Dividend Advisor. 

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency

Our TSI Dividend Sustainability Rating System generated seven stocks: Halifax-based Emera Inc. EMA-T owns 100 per cent of Nova Scotia Power, that province’s main electricity supplier. It also owns Tampa Electric, as well as power plants and gas pipelines in the U.S. and the Caribbean. Fortis Inc. FTS-T, headquartered in Newfoundland, is the main supplier of electrical power in Newfoundland and Prince Edward Island. It also owns electrical and gas utilities across North America. Wisconsin-based Alliant Energy Corp. LNT-Q sells electrical power and natural gas to 1.4 million customers in Wisconsin and Iowa. Ameren Corp. AEE-N, headquartered in St. Louis, supplies electricity and natural gas to 3.3 million customers in Illinois and Missouri. Calgary-headquartered ATCO Ltd. ACO-X-T controls Canadian Utilities Ltd. CU-T, also based in Calgary, while Capital Power Corp.’s CPX-T home is in Edmonton. All three Alberta firms offer exposure to power production in Canada and elsewhere.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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