This Canadian stock plans to raise its dividend by 8% each year through 2020.
The company now receives almost half of its earnings from a Florida electricity and natural gas provider it purchased in 2016. It is also working on several major projects that will convert more of its power to renewable sources. While the company’s debt is high, steady cash flow from regulated utilities should support its dividend increases; currently, the yield is a high 5.6%.
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EMERA INC. (Toronto symbol EMA; www.emera.com) owns 100% of Nova Scotia Power, that province’s main electricity supplier. This business supplies 20% of Emera’s earnings.
The remaining 80% of earnings come from the company’s investments in several power plants and gas pipelines in the U.S. and the Caribbean.
Those include Teco Energy, which it purchased in July 2016 for $13.9 billion. That firm supplies electricity and natural gas to 1.05 million customers in Tampa Bay, Florida. Another of Teco’s businesses distributes gas to 510,000 customers in New Mexico. Together, those operations supply 49% of Emera’s earnings.
The company also continues to work on other projects. Those include the Labrador Island Link, which will transmit power from a new hydroelectric facility at Muskrat Falls, Labrador, to the island of Newfoundland. Emera will invest up to $650 million for 59% of the project. Nalcor (Newfoundland’s government-owned power company) owns the other 41%. The Labrador Island Link should begin operating by June 30, 2018.
Emera has also completed work on its Maritime Link undersea cable, which will transmit electricity from the province of Newfoundland & Labrador to Nova Scotia. That project cost $1.6 billion.
Together, these projects will also help Emera comply with tougher environmental rules. By 2020, Nova Scotia Power will get 40% of its electricity from renewable sources.
Dividend Stocks: $8 billion earmarked for new projects between 2018 and 2021
To help cover the outlays for these projects, Emera continues to issue debt. That’s why its long-term debt was $13.3 billion (as of March 31, 2018), or a high 1.4 times its market cap.
However, Emera gets over 75% of its earnings from regulated utilities. Predictable cash flows from those businesses let it service the debt and invest in new projects. In all, Emera plans to spend $8 billion on new projects between 2018 and 2021.
For the first quarter of 2018, excluding unusual items, the company earned $202 million, or $0.87 a share. That’s 32.9% higher than a year earlier, when it earned $152 million, or $0.72 a share. Cash flow per share jumped 17.1%, to $1.92 from $1.64.
The extra cash flow from added operations will help the company with its plan to increase its dividend by 8% each year through 2020. In November 2017, Emera raised its quarterly payment to shareholders by 8.1%, to $0.565 a share from $0.5225. The current annual rate of $2.26 a shares yields a high 5.6%.
The company will probably earn $2.74 a share for all of 2018. The stock trades at a reasonable 14.6 times that projection.
Recommendation in TSI Dividend Advisor: Emera is a buy.
Each issue of our Dividend Advisor newsletter lists several high yield income payers along with their dividend sustainability rating. We cover more than 100 stocks in the newsletter.
Hi Hugh. Yes, utilities, given their high debt loads, are sensitive to interest rate increases, which tends to concern investors and impact their share prices.
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X No, I don’t want to make steady income from dividends.
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I am looking for list of Stocks which pay high Dividends. and the dates they pay. where I can find it.
Each issue of our Dividend Advisor newsletter lists several high yield income payers along with their dividend sustainability rating. We cover more than 100 stocks in the newsletter.
Shares sensitive to rising Interest Rates ???.
Hi Hugh. Yes, utilities, given their high debt loads, are sensitive to interest rate increases, which tends to concern investors and impact their share prices.