Sustainable dividends from power utilities set to gain from any interest rate drop spurred by today’s falling inflation.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:Two points if it has raised the payment in the past five years.One point for operating in non-cyclical industries.Two points for a strong balance sheet, including manageable debt and adequate cash.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.