Last month, the Bank of Canada announced a rate cut of a half-percentage-point – double the quarter-point reduction in September. This fourth consecutive cut has increased expectations for rates to continue to fall in 2025. Major Canadian banks like CIBC and RBC anticipate another half-point cut in December, with further forecasts suggesting rates could fall to between 2 per cent and 2.25 per cent by the middle of next year.
We identified utility companies that stand to benefit from future rate cuts in Canada using FactSet’s universal screening tool and applying the following parameters:Year-over-year dividend increases since 2020, and projected dividend increases in 2024, according to analysts’ estimates We ranked the remaining companies on three factors: debt-to-asset ratio, variable debt as a percentage of total debt, and interest coverage ratio. Companies with a lower debt-to-asset ratio are better positioned during uncertain interest rate environments as they have a smaller proportion of assets financed by liabilities. Additionally, companies with a higher proportion of variable debt to total debt will benefit the most from continuing rate cuts, as their interest payments will decrease.
a power generation company, ranked first in our screen with a debt-to-asset ratio of 0.4 and an interest coverage ratio of 2.3. The company specializes in the development, acquisition, and operation of different energy sources, including renewable and thermal power facilities. Compared with other utility companies in our screen, Capital Power had the second highest proportion of variable debt to its total debt, at 13.1 per cent. The company released third-quarter earnings on Oct.
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