Canadian utilities have sailed through fears about the spread of the coronavirus and the threat of declining global economic activity,. But the stocks are now approaching a hurdle that could prove more difficult to clear. The utilities sector in the S&P/TSX Composite Index increased 8.5 per cent in January. By comparison, the broader index is up less than 2 per cent since the start of the year.
The problem: High valuations make additional gains hard to fathom. The estimated price-to-earnings ratio for Canadian regulated utilities is above 23, which is well above the sector’s 10-year average of 17.8, according to a CIBC World Markets analyst.As a company’s dividend growth goes, so goes its share price, Rob Carrick writes.
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