CANADIAN UTILITIES LTD., $31.09, Toronto symbol CU, (TSINetwork Rating: Above Average; www.canadianutilities.com) is a buy.
Canadian Utilities distributes electricity and natural gas in Alberta and Australia. It also owns or invests in 7 non-regulated power plants—1 in Canada, 2 in Mexico, 3 in Australia and 1 in Chile. Parent company ATCO Ltd. (see next page) owns 52.7% of the company.
With the March 1, 2024, payment, Canadian Utilities raised your quarterly dividend by 1.0%. Investors now receive $0.4531 a share instead of $0.4486. The new annual rate of $1.812 yields a high 5.8%. The company has increased its dividend rate for 52 consecutive years.
Investors should note that Canadian Utilities recently converted all of its class B voting shares (symbol CU.X) into class A non-voting shares (symbol CU). That excludes class B shares held by ATCO.
Class B shareholders received 1.1 class A shares for each share they held. As a result of the swap, ATCO is now the sole owner of the class B shares. Canadian Utilities also delisted the class B shares from the Toronto Stock Exchange, which will cut the company’s administrative costs.
Canadian Utilities’ revenue in the quarter ended December 31, 2023, fell 12.0%, to $974 million from $1.11 billion a year earlier. The decline was mainly due to lower regulated power and gas rates.
However, earnings before one-time items gained 6.7%, to $192 million, or $0.71 a share, from $180 million, or $0.66. That’s due to its recent purchase of wind power projects and the start up of a solar project. The latest earnings also topped the consensus estimate of $0.69 a share. Note: these figures exclude unusual items, mostly gains and losses on hedging contracts that Canadian Utilities uses to lock in natural-gas prices.
The company now plans to spend between $4.1 billion and $4.8 billion on new projects and upgrades to its operations between 2024 and 2026. The additional cash flow from those projects will let it keep raising your dividend.
The company will probably earn $2.19 a share in 2024, and the stock trades at a moderate 14.2 times that estimate.
Including this latest increase, Canadian Utilities has raised its dividend an average 1.4% annually in the past 5 years. The stock’s TSI Dividend Sustainability Rating is Highest.
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