3 Reasons Why Canadian Utilities Is an Ideal Canadian Dividend Stock

Canadian Utilities (TSX:CU) stock is well known as a dividend star, but why? Let’s get into three reasons why it’s an easy win.

| More on:
The sun sets behind a power source

Source: Getty Images

If you’re looking for a dividend stock that’s just the simplest, easiest choice you could make, Canadian Utilities (TSX:CU) likely comes up again and again. The company is the first Dividend King the TSX today has ever had. It was the only option for a few years before another utility company joined its ranks.

But beyond its Dividend King status, what else does Canadian Utilities stock have to offer?


Stable business models provide investors with a sense of security, consistency, and potentially reliable returns over the long term. Stable businesses typically operate in industries where demand for their products or services remains relatively consistent over time. This predictability allows these companies to generate steady cash flows, which can be reassuring for investors. 

Companies with stable business models tend to be less affected by economic downturns compared to companies in cyclical industries. This resilience can help them maintain profitability and financial stability during challenging economic conditions. 

Canadian Utilities stock operates in regulated utility sectors such as electricity, natural gas, and pipelines. These are essential services that generate predictable cash flows regardless of economic conditions. As a result, the stock can afford to pay consistent dividends.

About that dividend 

Many stable companies have a history of paying dividends, and they often prioritize maintaining or increasing these dividend payments over time. This can be attractive to income-focused investors who rely on regular dividend income. Canadian Utilities stock fits this perfectly. 

Canadian Utilities stock has a tradition of increasing its dividend payouts over time. While the rate of increase may vary from year to year, the company’s commitment to growing dividends is evident in its historical performance. 

Canadian Utilities typically offers a competitive dividend yield relative to other stocks in the market. The dividend yield represents the annual dividend payments as a percentage of the stock price. Investors often seek stocks with attractive dividend yields for income generation.

Long-term growth

Finally, Canadians seeking a no-brainer buy should certainly consider Canadian Utilities stock, as it’s already seen such long-term growth. What’s more, utilities offer exposure to an industry that will remain essential for decades to come. 

While Canadian Utilities is primarily valued for its dividend income, it also offers the potential for long-term capital appreciation. As an established company with a diverse portfolio of assets, Canadian Utilities can benefit from infrastructure development, population growth, and energy demand trends over time. 

And while stable businesses may not experience rapid growth rates like some high-growth companies, they often have sustainable long-term growth potential. They may gradually expand their market share, invest in new technologies or products, or enter new markets, contributing to steady, long-term appreciation in their stock prices.

Bottom line

With a dividend yield of 6%, higher than the 4.99% five-year average, and trading at a historically lower-than-average 12.95 times earnings, Canadian Utilities stock is an ideal choice for those seeking dividends. What’s more, the stock may be down 23% in the last year but has been climbing back as interest rates look like they may lower in the next few months. This would be great for a company that takes out loans, with lower interest rates mean lower costs.

All in all, the company is a stellar, valuable option, providing investors stability, dividend income, and long-term growth.

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 Amy Legate-Wolfe 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.

More on Dividend Stocks

dividends grow over time
Dividend Stocks

How to Build a Powerful Passive-Income Portfolio With Just $20,000

It is an opportune time to invest $20,000 and boost passive income. Between higher yields and higher dividend growth, which…

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Dividend Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $7,000 in 2024

You can make passive income without risking your capital. Here's how the CI High Interest Savings ETF (TSX:CSAV) and other…

Read more »

woman retiree on computer
Dividend Stocks

Want $2,000/Year in Passive Income? Invest $26.8K in this Canadian Stock

Make $2,000 per year in passive income through this leading Canadian dividend stock.

Read more »

edit Sale sign, value, discount
Dividend Stocks

A 30% Discount on a Magnificent Dividend Stock You Don’t Want to Miss

What does a 30% discount on a magnificent dividend stock mean to your portfolio returns? And why you don't want…

Read more »

A plant grows from coins.
Dividend Stocks

Beat the TSX With These Cash-Gushing Dividend Stocks

Looking to earn a gushing stream of dividends? Don't just look at TSX stocks with big dividend yields. Look at…

Read more »

ETF chart stocks
Stocks for Beginners

3 Things You Need to Know if You Buy VFV Today

VFV is a popular Canadian ETF for tracking the S&P 500 Index. Here's what you need to know before you…

Read more »

Female raising hands enjoying vacation, standing on background of blue cloudless sky.
Dividend Stocks

3 Reasons to Buy BCE Stock Like There’s No Tomorrow

BCE (TSX:BCE) stock has been a bit of a dumpster fire this last year or so, but that doesn't mean…

Read more »

Canadian Dollars
Dividend Stocks

Invest $10,000 in 2 TSX Stocks for $614/Year in Dividend Income

Earn worry-free dividend income through these Canadian stocks with stellar dividend payment and growth history.

Read more »