Roger S. Conrad

Other than it’s the pending close of the tax year, there’s nothing magical about the final weeks of the year for investors.

Nothing alarms income investors more than fear of dividend cuts. So accusing a trusted company of nearing one is a time-tested way to get attention—whether you’re a Wall Street analyst or a Seeking Alpha blogger. BCE Inc (TSX: BCE, NYSE: BCE) and Eversource Energy (NYSE: ES) are recent targets of dividend cut speculation. But unlike the trio of companies currently on the Endangered Dividends List, actual risk is far less than it may first appear.

Electricity demand will grow six times faster over the next 20 years than it has over the previous 20. U.S. data center use alone will require 460 terawatt hours of new power by 2030, a compound annual growth rate of 22 percent. Utility rates will have to rise at much as 70 percent by the end of the decade to pay for needed system investment. Big Tech companies are on the verge of financing a wave of new nuclear power construction.

In the past month, America has elected a new president and Congress, along with literally hundreds of state legislators and governors. And the Federal Reserve has delivered on a second cut since its historic September 18 pivot, from “higher for longer” interest rates.

For investors, the far more consequential event has been the mostly passed season for Q3 earnings releases and guidance updates.

The Utility Report Card has my company-by-company analysis for the 170 utilities and essential services providers I’ve tracked now for nearly four decades. My top takeaway: Investment is booming, and that’s very good news for Conrad’s Utility Investor recommendations’ earnings, dividends and ultimately stock prices over the next few years.

Steadily growing cash flow and dividends by adding long-term contracted power generation: That’s been Clearway Energy’s (NYSE: CWEN) successful strategy for the decade plus since former parent NRG Energy (NYSE: NRG) launched it as NRG Yield. And the company continues to thrive under Clearway Group 54.91% of voting shares, 42.12% economic interest), which is owned by TotalEnergies (Paris: TTE, NYSE: TTE) and Blackrock/GIP.

For most of 2024, long-time water utility favorite Essential Utilities (NYSE: WTRG) was unable to affirm previous long-term earnings growth guidance of 5 to 7 percent. This month, it did so again, thanks to amicable natural gas and water rate decisions in Pennsylvania. Home to its cornerstone water franchise and only gas utility—Peoples Natural Gas—the Keystone state is by far Essential’s most important regulatory jurisdiction. And in a 5-0 ruling the Public Utility Commission approved both a $93 million increase and a “weather normalization” mechanism for gas distribution, at a stroke limiting weather-related fluctuations in revenue.

The Dow Jones Utility Average’s year to date return is now 20.5 percent. That’s a decline of around -1.4 percent since the Federal Reserve pivoted to lower interest rates on September 18. The DJUA is once again lagging well behind the S&P 500, which as of Friday’s close was sitting on a 27 percent return. And it’s well behind the Nasdaq 100’s 26 percent plus return as well.

Just weeks after raising its final dividend for FY2024 (end June 30), Spark New Zealand Ltd (NZ: SPK, OTC: SPKKY) announced a -9.1 percent cut in its FY2025 dividend. Last month, I noted management’s dour forecast for FY2025. And it’s now doubled down on that outlook, cutting EBITDA guidance to a range of NZD1.12 to NZD1.18 billion from the previous NZD1.17 to NZD1.22 billion. The telecom also cut its planned capital expenditures to NZD415 to NZD435 million, versus previous guidance for NZD460 to NZD480 million.