If there’s one dividend stock that Canadians should consider, it has to be Canadian Utilities (TSX:CU). CU stock is the original Dividend King on the TSX today, with over 50 years of consecutive dividend increases. While another may be on the TSX today, the company has already proven its value when it comes to bringing in dividends.
Yet this isn’t the only reason to consider the dividend stock right now. So, let’s get into a few reasons why.
1. Earnings remain stable
CU stock has seen earnings drop slightly in the last few years, with inflation and interest rates taking a hit on the company. Yet even so, overall, the stock has seen stable earnings in the face of some pretty extraordinary circumstances.
An economic downturn on top of a pandemic has led investors to now view the stock as potentially a safe haven. This comes from looking at the stock’s earnings over the last few years. Third-quarter results showed adjusted earnings hit $87 million, down from $120 million in 2022. But there seem to be a few reasons to consider growth for the stock in the future.
2. Wheeling and dealing
CU stock has been making deals and partnerships recently to see its company expand. This recently included an agreement with the Chiniki and Goodstoney First Nations to create the largest solar installation in an urban centre in Western Canada. The First Nations would be the majority owners of the stake in the facility from the deal.
Another 12.5-year virtual power-purchase agreement was created with Lafarge, which will purchase 100% of the solar power generated from the Empress solar project. And with a long history of growth, acquisitions, and expansion, it’s likely that there will be more of this in 2024.
3. Renewable interests
As mentioned, CU stock invested in the largest solar installation in Western Canada. Yet this wasn’t the only area of renewable energy the company has invested in. In fact, the company has gone down under to start a joint venture for the South Australian Hydrogen Jobs Plan project.
This project would create a 250-megawatt (MW) hydrogen production facility, a 200-MW hydrogen-fuelled electricity generation facility, and a hydrogen storage facility. This is all set for completion in the second quarter of 2024.
4. Strong fundamentals
Looking at CU stock’s fundamentals at this time, the dividend stock continues to look quite valuable. Shares trade at just 14.78 times earnings and 1.68 times book value. Further, it holds just 9.03 of enterprise value over earnings before interest, taxes, depreciation and amortization. Therefore, it still has plenty of cash on hand to allow it to invest more in the near future.
Yet shares are still down by about 13% in the last year, allowing investors to likely see a quick recovery once earnings show clear improvement. Therefore, it certainly looks like a great time to pick it up in bulk.
5. The dividend
Then, of course, there’s the dividend I mentioned. Again, that’s over 50 years of dividend increases, currently with a dividend of $1.79 per share. That brings in a current dividend yield at 5.55%, which is quite a bit higher than the five-year average of 4.92%.
And that dividend remains quite safe, with a payout ratio of 82% not putting it at any serious risk — especially as the market recovers. So, with more growth planned, a great share price, and a higher dividend yield, now is the time to pick up CU stock in bulk.
