Roger S. Conrad

The last 18 months have been rough going for financial companies. And unfortunately, that’s when we re-entered Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI), a business development company specializing in renewable energy and efficiency projects. Organized as a REIT for tax reasons, Hannon has more than doubled its total assets since 2019. And management reporting year-over-year increases in Q1 of 25 percent and 15 percent in its portfolio and managed assets, respectively. Distributable net income per share stayed on track with guidance for 10 to 13 percent annual growth, fueling robust dividend increases of 5 to 8 percent.

California’s wildfires are getting worse. The state’s electric power grid, however, is systematically becoming more resilient. From 2019-2022, for example, cumulative structures destroyed by wildfires linked to Edison International’s (NYSE: EIX) southern California system were 96 percent less than in the 2017-18 period. And as a result, the company’s post-2018 wildfire liabilities not covered by insurance have been immaterial, versus $8.8 billion incurred in 2017-18.

The headline may sound counterintuitive. But paying attention on what you can control has consistently proven to be the best way for investors to stay whole in tough times, while positioning for the recovery that always follows. The best metaphor for the current stock market is a small group of generals leading an impressive-looking advance, but with a rapidly diminishing number of troops behind them. We know from history that these things have always ended badly. But while they last, it’s increasingly difficult for investors to resist their pull.

First the good news: No companies in our Utility Report Card coverage universe announced dividends cuts last month. The bad news is none escaped the Endangered Dividends List. And in fact, the situation for several worsened, raising odds of cuts. That includes especially the three communications stocks: Telephone and Data Systems (NYSE: TDS), Uniti Group (NSDQ: UNIT) and Vodafone Group (London: VOD, NYSE: VOD).

A couple months ago, the stock market appeared headed for a relapse of potentially epic proportions. Founded on the premise the Federal Reserve’s battle against inflation had been won, the early 2023 rally was fizzling, as it became clear the central bank wasn’t relenting. The banking system had revealed some fairly large cracks, with the demise of SVB seeming to spread to regional banks in general. And the federal government was lurching toward a first ever default.

Earlier this month, New York announced a ban on new natural gas hookups starting later this decade. Then Texas imposed major new restrictions on wind and solar deployment. And both states respectively released plans to spend billions of taxpayer money to build new renewable energy and natural gas generation, if the private sector doesn’t jump fast and high enough.

Not to be left out, Congressional Republicans passed legislation to undo the Biden Administration’s two-year solar panel tariff relief. And the House is threatening to trigger a first-ever US default if Inflation Reduction Act subsidies aren’t unwound, just as the Biden Administration is rolling out all-new restrictions on fossil fuel use including transport.

Back in 2003, Conservative Holding Duke Energy (NYSE: DUK) was a sprawling utility conglomerate. Its global portfolio of assets included real estate management, an Ecuadorian wireless phone and Australian natural gas pipelines. That’s when management began a long transition back to its regulated electric utility roots, selling assets, paring debt and investing in rate base. And later this year, Duke will finish the journey by selling its commercial renewable energy business, turning the company’s focus squarely on its $145 billion, 10-year utility CAPEX plans.