Roger S. Conrad

Utilities were the last major sector to make a post-pandemic high. But in late March, the Dow Jones Utility Average smashed through the once unassailable 1,000 level and hasn’t looked back yet.

Chinese power producer Huaneng Power International (HK: 902, NYSE: HNP) did not declare a dividend for fiscal year 2021. That means investors will likely have to wait until calendar 2023 for a cash payout.

First off, let’s dispense once and for all with the fallacy that rising interest rates are always a bad thing for dividend paying stocks.

A big increase in borrowing costs can certainly derail earnings and dividends of highly leveraged companies. And the Federal Energy Regulatory Commission recently cut PG&E Corp’s (NYSE: PCG) allowed return on equity for transmission to 9.26 percent, meaning there’s no guarantee regulators will allow returns to keep pace with rising interest rates.

Thus far, 2022 has been a series of jagged ups and downs for global stock markets, with most prices ratcheting lower. Regulated US utilities, however, have been staging a quiet rally.

After briefly rising over 1,000 for the first time, the Dow Jones Utility Average is in the black this year. That means essential service companies, including big communications stocks, are outperforming pretty much everything this side of oil and gas.

Electric, gas, energy infrastructure, water and communications service providers are the kind of substantial, reliable, dividend paying companies investors like to hold in turbulent times. And early 2022 certainly qualifies, with the highest inflation in 40-plus years, a diminished but lingering pandemic, continuing supply chain disruption and now a full-on war.

Russia’s invasion of Ukraine and the unexpectedly severe global reaction to it have understandably triggered mass selling of any company with perceived exposure. Among the damaged is Aggressive Holding Enel SpA (Italy: ENEL, OTC: ENLAY).

First off, everything I said in last month’s Portfolio discussion about reliable dividend growth goes double now. Companies that have it will beat inflation and grow your wealth in coming years. Those that don’t won’t.

Korea Electric Power (Korea: 015760, NYSE: KEP) still hasn’t declared an annual dividend for payment next month. But the company is effectively priced for a zero payout, after announcing a record operating loss for 2021 and guidance for an even larger one this year.