What are we looking for?
Sustainable dividends from the nuclear power industry as global warming and the war in Ukraine force a global rethink on this clean energy source.
The screen
Recent news that Canada has signed a $3-billion deal with Romania to build two new nuclear reactors in the eastern European country highlights the improving prospects for the nuclear power industry.
The outlook for the industry had been uncertain since Japan idled its nuclear power program in the wake of the 2011 Fukushima disaster. However, nuclear power has garnered greater interest as Europe looks to replace Russian natural gas and the world, more broadly, looks to cut greenhouse gas emissions from fossil fuels. Those efforts may be enough to offset concerns about the risks associated with otherwise emissions-free nuclear reactors.
Our search focused on top U.S. and Canadian firms tied to nuclear power and poised to gain from industry trends. We then applied our TSI Dividend Sustainability Rating System, which awards points to a stock based on key factors:
- One point for five years of continuous dividend payments, and 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 is 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; companies with four to six points have average sustainability; and those with one to three points have below-average sustainability.
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
Our TSI Dividend Sustainability Rating System generated six stocks. Cameco Corp. CCO-T, headquartered in Saskatoon, is one of the world’s largest producers of uranium (although with a very small dividend yield). NextEra Energy Inc. NEE-N, based in Florida, is a holding company for Florida Power & Light Co. It gets about a fifth of its power from nuclear plants in Florida, New Hampshire and Wisconsin – and like the other power generators below, is well placed to add to its position as one of the industry’s leaders.
Constellation Energy Corp. CEG-Q, headquartered in Baltimore, operates the largest network of nuclear plants in the United States, with its 21 reactors generating 65 per cent of its output. Duke Energy Corp. DUK-N, based in North Carolina, is one of the largest energy producers in the U.S. It generates about 30 per cent of its electricity from 11 nuclear units at six sites in North Carolina and South Carolina. Virginia-based Dominion Energy Inc. D-N gets about 40 per cent of it power from its four nuclear plants. And finally, BWX Technologies Inc. BWXT-N, also headquartered in Virginia, is a leading maker and supplier of nuclear components, reactors, and fuel to the U.S. government, as well as the private sector. It also provides medical radioisotopes and more.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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Scott Clayton