Feature Article

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.

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.