The Bank of Canada has held its key interest rate at 2.75% since the 0.25% cut in March this year. Policymakers will meet on September 17, 2025, for another rate decision. Economists anticipate a rate cut announcement since Canada’s inflation rate dropped to 1.7% in July from 1.9% in June. The August inflation data will be released the day before the meeting.
However, the Feds may not lower rates yet, as core inflation remains elevated at 2.6%. Sticky inflation is likely to occur if prices do not adjust quickly to changes in supply and demand. Grocery prices, for example, accelerated to 3.4% month-on-month from 2.8%.
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Protection against inflation risks
Investors can mitigate inflation risks by moving to a defensive sector such as utilities. Utility stocks are generally viewed as bond hybrids or have bond characteristics. They can help stabilize a portfolio during economic downturns. A top-tier constituent that offers crucial protection is Emera (TSX: EMA).
The $19.4 billion company owns and operates cost-of-service, rate-regulated electric and gas utilities. Emera serves about 2.6 million customers in Atlantic Canada, Florida, New Mexico, and the Caribbean. The high-quality utility assets support predictable and growing earnings, cash flow, and dividends for shareholders.
According to management, the constructive regulatory environments in which Emera operates ensure long-term value creation for customers and the utility. Scott Balfour, President and CEO of Emera, said, “We continue to make essential investments across our operating companies to enhance reliability, storm harden our infrastructure, and support economic and customer growth in the communities we serve.”
Financial performance
In Q2 and the first half of 2025, adjusted net income rose 56.3% and 67.6% year-over-year to $236 million and $615 million, respectively. “The second quarter of 2025 marks our fourth consecutive quarter of meaningful earnings increases, which can be attributed in large part to strong growth and favorable weather in Florida,” added Balfour.
Emera’s operating cash flow also increased 32% year-over-year to $1.3 billion during the same quarter. Approximately 55% of the $1.7 billion capital expenditure in the first half of 2025 was allocated to transmission, distribution and gas infrastructure, supporting reliability and customer growth.
Dividend growth stock
Performance-wise, Emera (+25.1%) outperforms the utilities sector (+9.4%) and the TSX (+17.5%) year-to-date. As of this writing, the share price is $64.81 and the dividend yield stands at a lucrative 4.5%. Notably, EMA is a dividend growth stock, evidenced by 18 consecutive years of dividend increases.
With its new $20 billion five-year capital plan, Emera forecasts rate base growth of 7% to 8% through 2029. The annual dividend growth target within the period is 1% to 2%, leaving enough free capital for investments in regulated utilities.
Foundational growth driver
Emera believes that earnings opportunities in regulated utilities are a function of the size of investment in the rate base, the equity in the capital structure, and the targeted return on equity (ROE). All three items are established and approved through regulation.
The utility stock’s low-volatility profile and strong history of dividend growth make it suitable for risk-averse, long-term, and income-focused investors. No worries because you have income stability and crucial protection against sticky inflation.
