The stock market is highly volatile. A stock that made you a millionaire in a rally can suddenly put you in the red if you miss selling it at the peak. In this unpredictable and volatile market, are you looking for a go-to stock you can bank on in good and bad times? A stock that you can invest in anytime whenever you have money without thinking twice. Such stocks are dividend aristocrats. Although they don’t give growth, they surely help you earn decent dividends to keep you afloat. One such no-brainer dividend stock is Canadian Utilities (TSX:CU).
Why is Canadian Utilities a no-brainer dividend stock?
If you are looking for capital appreciation, short-term growth or long-term wealth creation, Canadian Utilities is not for you. In fact, the stock price has dipped 21% in the last 10 years. However, this stock is good at one thing, and that is paying regular dividends.
CU stock has the longest track record of increasing annual dividends of 52 years in a row. Even Enbridge hasn’t beaten this record. This is because Canadian Utilities follows a low-risk business model. It earns stable cash flow from electricity generation and distribution, and natural gas distribution. Atco, its parent company, is also expanding into hydrogen projects. Canadian Utilities has 1.3 GW of renewable energy capacity under development, which is expected to generate 8–10% returns.
The demand for electricity and natural gas will only increase, bringing cash flows to Canadian Utilities for another 50 years. Even Enbridge is acquiring natural gas utilities to stabilize its dividend growth.
Do Canadian Utilities’ shares produce good returns?
Looking at the stock price, you might be questioning whether Canadian Utilities will give you decent returns. However, if you look at its dividend cycle, $10,000 invested in Canadian Utilities’ dividend reinvestment program (DRIP) in January 2014 would now be worth $13,000. If you opt for a dividend payout, you can get $645 in annual dividends for years.
| Year | CU Dividend Per Share | Dividend Amount | CU Stock Price on January 1 | DRIP Shares | Total Shares |
| 2024 | $1.81 | $645.67 | $31.77 | 19.05 | 356.25 |
| 2023 | $1.79 | $605.08 | $36.75 | 15.55 | 337.21 |
| 2022 | $1.78 | $571.51 | $36.23 | DRIP Paused | 321.66 |
| 2021 | $1.76 | $565.85 | $31.22 | DRIP Paused | 321.66 |
| 2020 | $1.74 | $560.19 | $39.26 | DRIP Paused | 321.66 |
| 2019 | $1.69 | $543.86 | $31.31 | DRIP Paused | 321.66 |
| 2018 | $1.57 | $506.03 | $37.28 | 11.88 | 321.66 |
| 2017 | $1.43 | $442.98 | $36.22 | 10.73 | 309.77 |
| 2016 | $1.30 | $388.75 | $31.81 | 10.70 | 299.04 |
| 2015 | $1.18 | $340.25 | $40.94 | 7.34 | 288.34 |
| 2014 | $1.07 | $300.67 | $35.61 | 281.00 |
How does Canadian Utilities’ stock compound dividends?
In January 2014, $10,000 would have brought you 281 shares of CU at $35.61 per share. The DRIP will reinvest the dividend to buy more shares of Canadian Utilities. Accordingly, it brought 7.3 DRIP shares from the $300.67 dividend received in 2014. I have taken the annual reinvestment for ease of calculation. Originally Canadian Utilities reinvested dividends every quarter.
The utility paused its DRIP from January 2019 to January 2022. During that time, you would have earned a consolidated dividend of $2,241 on 321.7 shares. At the end of 2023, you would have 356.3 shares of Canadian Utilities worth $10,766 at a $30.22 share price. This decline in its share price helped buy more DRIP shares and compound returns.
Final takeaway
Canadian Utilities’ stock can add some stability to your passive income portfolio. However, consider diversifying your portfolio across growth and high-yielding stocks to build wealth while keeping Canadian Utilities as a financial cushion for uncertain times.
