Feature Article

Doom or boom: The stock market of early 2025 can’t seem to make up its mind. Last week ended on a good note for most of the Utility Report Card coverage universe. And several Portfolio stocks are already sitting on sizeable year-to-date gains. Those include...

Elevated debt: That’s historically been the greatest threat to utility and essential services company dividends. And it’s the case in 2025 as well, with the Federal Reserve holding interest rates higher for longer and concerns about global economic growth rising. Regulated utilities can safely carry much higher levels of debt than other industries. That’s because the revenue is backed by monopolies providing essential services at regulated rates. Other Utility Report Card coverage universe companies protect revenue from economic ups and downs with long-term contracts.

Investor-owned utilities serve 72 percent of US electric and natural gas customers. That’s according to the US Energy Information Administration. In contrast, investor owned water and wastewater utilities serve just 11 percent of Americans. Everyone else pays their bills to either large municipal systems like the New York Municipal Authority—or else the 48,000 plus community water systems and/or 23,000 plus operators of wastewater treatment facilities scattered across the country.

Four years ago, Brookfield Renewable’s tax advantaged partnership units (TSX: BEP-U, NYSE: BEP) and C-Corp shares (TSX: BEPC, NYSE: BEPC) were trading at twice current levels. That’s despite growing profits 10 percent plus annually since, and paying a dividend now 23 percent higher. I expect both partnership units and C-Corp shares to double in the next 12 to 18 months.

Since Thanksgiving, shares of Edison International (NYSE: EIX) are down  more than -40 percent. The stock sells for just 8.8 times the mid-point of its 2025 earnings guidance range of $5.50 to $5.90 per share. And the dividend yield is nearly 7 percent, following last month’s 6.2 percent increase. The reason: Southern California’s devastating wildfires this year, and the possibility utility equipment was responsible for some damage and loss of life. Estimates run from $80 to $170 billion.

From Deepseek AI to federal government upheaval: There’s been no shortage of stock market-moving headlines since the January issue of Conrad’s Utility Investor posted. Utilities and essential services stocks aren’t known for volatility. But several have taken investors on wild rides over the last month.

XPLR Infrastructure (NYSE: XIFR), formerly known as NextEra Energy Partners, will not pay a dividend for the foreseeable future. That’s the chief result of the company’s strategic review announced in late January. I highlighted the rationale for the move in the January 28 Alert: “More Earnings, XPLR Infrastructure and Deepseek AI Fallout,” also posted on the Conrad’s Utility Investor website.

US-based utilities have always been the core of investment strategy at Conrad’s Utility Investor. More than one-third of the companies in the Utility Report Card coverage universe, however, are actually based outside the US. That includes seven Aggressive Holdings and four Conservative Holdings, one of which TC Energy (TSX: TRP, NYSE: TRP) is also a Top 10 DRIP. Two others—AES Corp (NYSE: AES) and Chevron Corp (NYSE: CVX)—are true multi-nationals.