Roger S. Conrad

The explosion of interest in all things artificial intelligence. The long-awaited Federal Reserve pivot to lower interest rates. And a November election result that’s simultaneously sparked euphoria and panic: Those were the key themes shaping returns in the Conrad’s Utility Investor coverage universe for calendar year 2024.

I can say last year was a very good one for our three model portfolios overall. Conservative Holdings posted a total return of 15.8 percent. Aggressive Holdings were up 30.2 percent. And the Top 10 DRIPs gained 28 percent.

Energy Information Administration data says 2024 US electricity demand growth nearly tripled the average yearly rate so far this century. And no energy resource contributed more than natural gas, at 43 percent and rising. National Fuel Gas (NYSE: NFG) is America’s sole fully “integrated” natural gas company, combining exploration and production (E&P) with midstream gathering and pipelines and utility distribution operations. It pays a steadily growing dividend, maintains an investment grade balance sheet and has upside leverage to natural gas prices.

Steady expansion “consistent with financial guardrails:” That’s been the formula for Pembina Pipeline (TSX: PPL, NYSE: PBA) the past two decades, as it’s become the largest Canada-focused midstream energy company. Guidance announced mid-December affirms the strategy is alive and well. Management expects 2025 EBITDA between CAD4.2 and CAD4.5 billion—with volume growth across the Western Canadian Sedimentary Basin, new assets entering service and increased ownership of the Alliance Pipeline and Aux Sable system offsetting lower priced re-contracting of the Cochin Pipeline and likely “moderation of commodity margins.”

For the Conrad’s Utility Investor model portfolios, 2024 was a very good year. The Conservative Portfolio with its focus on high income, safety and long-term capital appreciation posted a total return of 15.8 percent. The Top 10 DRIPs’ dividend reinvestment strategy delivered a compound gain of 28 percent. And the Aggressive Holdings’ higher risk/return focus fared best of all, with a 30.2 percent return.

Last year, seven companies in the Conrad’s Utility Investor coverage universe cut or eliminated their dividends. They were: Algonquin Power & Utilities (TSX: AQN, NYSE: AQN), Innergex Renewable Energy (TSX: INE, OTC: INGXF), SSE Plc (London: SSE, OTC: SSEZY), Superior Plus (TSX: SPB, OTC: SUUIF), Telephone and Data Systems (NYSE: TDS), Uniti Group (NSDQ: UNIT) and Vodafone Plc (London: VOD, NYSE: VOD).

When a stock surges or crashes, there’s always a reason. But barring a real change in business value, there’s always going to be a reversion to the mean: Laggards become the leaders and vice versa. It’s fair to say the artificial intelligence revolution was the key driver of returns for the top 15 performing stocks in the Conrad’s Utility Investor universe last year. Conversely, foreign currency weakness along with concerns about heavy debt and renewable energy’s future growth were the primary reasons for weakness of the bottom 10.

Is inflation really quelled? How fast will the Federal Reserve cut interest rates? And which campaign promises will the incoming Trump Administration push hardest to deliver?

The answers will literally make or break the S&P 500 in 2025. It’s one-third weighted in just 7 Big Tech stocks, already priced for perfection. And more stock market money is now passively invested than actively managed. So an S&P plunge would crunch many Americans’ wealth, and possibly the economy as well.