Here’s Why Canadian Utilities Is a No-Brainer Dividend Stock

Canadian Utilities (TSX:CU) is among the leading dividend growth stocks long-term investors may want to consider on dips moving forward.

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While strategies in the stock market continue to change, investing in dividend stocks continues to be as popular as ever. Historically, dividend stocks have outperformed the S&P 500 with lower volatility. 

Canadian Utilities Limited (TSX:CU) is a favourite among Canadian investors as a source of passive income. This company was among the first in Canada to receive the title of ‘Dividend King’ for an impressive dividend history of more than 51 years. 

If you are looking for the best dividend stock, here’s why CU should be in your portfolio for 2024. 

This company comes with an impressive dividend history

Canadian Utilities and its subsidiaries are involved in electricity, retail energy businesses, and natural gas in Australia, the United States, and other countries worldwide. This company operates across segments like energy infrastructure, utilities, corporate, and others. 

On a month-over-month basis, Canadian Utilities’ stock price has moved modestly higher. At the start of Q3 FY2023, this company announced a partnership agreement between Barlow Snow Power projects, Chiniki, and Goodstoney First Nations for Deerfoot. This catalyst may be partly responsible for the stock’s strong performance.

The company’s current dividend yield of 5.6%, in combination with its incredible dividend growth history, makes this a stock long-term investors will want to consider.

Revenue stability is a key factor dividend investors should like

In the utility sector, Canadian Utilities remains a go-to stock for long-term investment plans due to the company’s impressive dividend growth track record of 51 years. 

One of the primary reasons for Canadian Utilities’ excellent dividend track record is its business arrangements with clients. Most of these are long-term contracts. This helps the company generate stable revenue, which in return powers its excellent dividend performance. 

The company’s reliance on long-term and regulated contracts paints a picture that they might not bring in very high returns during bullish markets. Nevertheless, returns will not fall drastically during bear markets. 

Canadian Utilities has stated its intentions to invest US$4 billion in growth projects over the next two years. This acts as a silver lining for existing investors who intend to stay invested for the upcoming years.

When interest rates drop, this stock could go on a nice run

In the past few years, several factors have negatively impacted the performance of utility stocks like Canadian Utilities. Spiking interest rates was one such factor that led to CU’s performance shrinking over a certain time. However, as interest rates seem to move down, analysts predict Canadian Utilities stock can witness an improvement in its stock price. 

As a prominent dividend-paying company, improved financial performance will open the doors to long-term investors. Existing shareholders can also choose to hold their assets to reap benefits from a quarterly dividend yield of 5.63%. 

Bottom line

To conclude, investors looking for the best stocks to earn passive income with regular dividends must not hesitate to add Canadian Utilities to their portfolio. This company provides regular cash flow and can help your finances grow, with decent returns in both bearish and bullish markets. Thus, this stock will also be a wise choice for new investors with a moderate-risk appetite. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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