Here are two regulated utility stocks, both primarily electric power distributors, and both blue chip Canadian dividend stocks, that are buys for both share price growth and dividends.
Companies that raise their dividend are usually optimistic about the future. This is what Canadian Utilities (TSX—CU) did right out of the gate this year. On January 12, the company declared a first-quarter dividend of $0.3575 a share, a 10-per-cent increase over the $0.3250 it paid in each of the previous four quarters.
Canadian Utilities is a member of the Atco Group of companies, a group which overall is engaged in four businesses: structure and logistics, such as workforce housing; electricity, such as power generation; pipelines and liquids, such as natural gas transmission and distribution; and retail energy, such as electricity and natural gas service.
For the nine months ended Sept. 30, 2016, Canadian Utilities made $424 million (adjusted), or $1.58 a share, compared with $330 million, or $1.25 a share, in the same period of 2015.
Earnings at the electricity business rose 12.4 per cent to $291 million, thanks to continued capital investment and growth in the rate base within its regulated electricity business, and business-wide cost reductions efforts.
Earnings at the pipelines and liquids business rose 65.7 per cent to $174 million, primarily due to the same reasons noted above for the electricity business.
Canadian Utilities is in the midst of a three-year, $5.3-billion capital investment program, which ends in 2018. The company is investing this money in its regulated utility business and commercially secured capital growth projects. It expects these investments to contribute significantly to earnings and cash flow.
Canadian Utilities trades around a reasonable 16.4 times its likely 2017 earnings of $2.26 a share. The current annual dividend of $1.43 a share yields 3.9 per cent.
Canadian Utilities is a buy for growth and income.
Emera strengthens its balance sheet
Late last year, Emera Incorporated (TSX—EMA) entered into a bought deal with a syndicate of brokers that saw it sell 7.6 million common shares for total proceeds of $345 million. Around the same time, the company sold its 4.7-per-cent stake in Algonquin Power & Utilities Corp. for total proceeds of about $142 million. These moves have reduced Emera’s earnings per share estimates for 2017. But they have also strengthened the company’s balance sheet.
Emera is a geographically diverse energy and services company headquartered in Halifax, with investments throughout North America and in four Caribbean countries. The company invests in electricity generation, transmission and distribution, and utility energy services with a focus on transforming from high to low carbon energy sources.
Third-quarter results were particularly strong because they included earnings from Emera Florida and New Mexico for the first time. Emera acquired electric and gas utilities in these states from Teco Energy on July 1, 2016. The third-quarter results, therefore, reflected summer earnings in Florida and the benefits of cost control at New Mexico Gas Company.
Emera is a buy for growth and income.
This is an edited version of an article that was originally published for subscribers in the February 2017/First Report of The MoneyLetter. You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter.
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The MoneyLetter •2/23/17 •