It’s not every day you find a Canadian stock that offers a rock-solid business, dependable dividend growth, and a history of rewarding shareholders no matter what the market throws its way. And yet, Canadian Utilities (TSX:CU) has done just that, and then some.
Now trading around $38.75 at writing, this utility giant offers a juicy 4.7% dividend yield, and it just posted a quarter that proved once again why it deserves serious attention from long-term investors. Let’s take a closer look at why Canadian Utilities might be the one stock you’d feel good about putting your entire Tax-Free Savings Account (TFSA) into.
About CU
For starters, CU is Canada’s only publicly traded utility that has raised its dividend every single year for 52 years straight. That’s longer than most investors have been alive. While other dividend stocks scramble during downturns or hike rates one year only to cut them the next, CU has quietly built a reputation for reliability.
As of writing, the dividend stock declared a third-quarter dividend of $0.4577 per share, or $1.83 annually, continuing that remarkable streak. At the current share price, that amounts to a 4.73% yield. If you’re investing in a TFSA, that’s entirely tax-free income, and that makes a difference over time.
More to come
Beyond the dividend, CU’s business is humming along nicely. In its most recent quarter, CU reported adjusted earnings of $121 million, or $0.45 per share. That’s up from $117 million, or $0.43 per share, in the same quarter last year. This isn’t a company resting on its dividend laurels; it’s growing.
Management invested $382 million in capital expenditures during the quarter, with 95% of that going into regulated utilities. These are low-risk, stable assets that bring in predictable income. Major projects like the Yellowhead Pipeline and Central East Transfer-Out (CETO) project are expected to support long-term earnings growth, particularly as Alberta pushes toward renewable energy integration.
Considerations
CU also has a very low beta of 0.59. That means it tends to move less than the broader market. In other words, when volatility strikes, CU tends to stay steady. That makes it a great defensive hold, especially for retirees or anyone relying on a stable income.
Of course, nothing is perfect. The stock isn’t exactly dirt cheap, trading at a forward price-to-earnings ratio of about 16.2. That’s not outrageous, but it’s not a screaming bargain either. And its payout ratio is over 111%, which could raise some eyebrows.
In fact, CU has been through much worse (including the pandemic) and never cut its dividend. That’s a testament to its disciplined management and strong balance sheet.
Bottom line
If you’re looking for quick gains, Canadian Utilities probably won’t excite you. But if you’re after a steady, tax-free income, CU is tough to beat. It’s rare to find that kind of dependability in today’s market. CU isn’t flashy, but that’s what makes it such a brilliant TFSA pick. Whether you’re starting out or nearing retirement, it’s the kind of stock that lets you sleep easy, and that’s worth a lot.
So, yes, if I had to pick one dividend stock to put my entire TFSA into, Canadian Utilities would be at the top of the list.
