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Endangered Dividends

Uniti Group Buckles, UGI Corp Off the List

By Roger S. Conrad on May. 9, 2024
Debt remains the number one threat to essential service dividends. The latest to fall victim: Telecom infrastructure company Uniti Group (NSDQ: UNIT). This month Uniti announced it will merge with privately held Windstream Holdings, its former parent and still largest customer by far. Management says the union will create the “premier insurgent fiber provider.” But this is really a cost-cutting and debt reduction deal: The companies target $100 million in operating expense cuts and “$20 to $30 million” in capital spending “synergies.”

Debt’s Still a Threat But Waning

By Roger S. Conrad on Apr. 3, 2024
In this month’s Utility Report Card, I highlight how companies stack up on each of our Quality Grade criteria. One big takeaway on balance sheet risk: Higher for longer interest rates are a much-diminished risk to dividends. Companies are still paying more to refinance debt. But long-term borrowing costs are actually lower than where they began 2023 for most companies. And the result is the wave of debt offerings highlighted in URC comments, particularly of 10 years maturity and greater.

Innergex Surprises: But Building a Financial Cushion Makes Sense

By Roger S. Conrad on Mar. 11, 2024

Dominion Energy (NYSE: D) will drive down its payout ratio by holding dividends level the next few years. And other companies will do the same by sharply reducing the size of increases—and holding in more cash to self-fund growth. So far in 2024, however, just two companies have announced dividend cuts versus several dozen increases. The first was Orsted A/S (Denmark: ORSTED, OTC: DNNGY), a widely expected move brought on by vast cost overruns from building offshore wind projects. Since then, however, Orsted received a much needed shot in the arm, as its Sunrise Wind project won a new contract with New York state. The stock’s a buy up to 25 for patient, aggressive investors who don’t need the income.

One Off-List Cut But No Surprises

By Roger S. Conrad on Feb. 12, 2024

So far in 2024, some two-dozen Utility Report Card coverage universe companies have raised dividends. And as this month’s comments indicate, that number could well treble over the next month, as more release Q4 numbers and update guidance. In contrast just one company, Orsted A/S (Denmark: ORSTED, OTC: DNNGY), has announced a dividend cut so far this year. The company wasn’t on the Endangered Dividends List. But neither was the move a real surprise and it was clearly strategic, demonstrated by the stock’s stable performance since last week’s announcement.

Dividend Cuts in 2024: Rare and Likely Strategic

By Roger S. Conrad on Jan. 11, 2024

Six companies in the Utility Report Card coverage universe cut dividends in 2023. That’s been about the average count for most years since the mid-1980s, when I began tracking utilities and essential services stocks. But having so few last year was quite a demonstration of sector resilience.

SSE Cuts: That Makes Six for 2023

By Roger S. Conrad on Dec. 11, 2023

UK electric utility SSE Plc (London: SSE, OTC: SSEZY) has “rebased” its twice-annual dividend to a new rate of 60 pence, starting with the March 2024 payment. That’s roughly -38 percent less than the previous annualized rate of 96.7 pence. As noted in my Utility Report Card comments, management stuck to its previous full-year FY2024 (end March 31) earnings guidance range, with a mid-point of GBP1.50 per share. That was despite what appeared to be disappointing results for the first half (end September 30), as adjusted EPS sank by roughly -11 percent.

SSE Will Cut, Vodafone at Risk

By Roger S. Conrad on Nov. 13, 2023

There were zero dividend cuts in the Utility Report Card coverage universe last month. Nor were there any negative Q3 surprises to push another company onto the Endangered Dividends List.

Dominion Energy (NYSE: D) is off this list this month. Management provided details during its Q3 earnings call that strongly back the integrity of the current dividend. The stock is a buy up to 65 and is my Conservative Focus.

Dividend Cuts Priced in But None This Month

By Roger S. Conrad on Oct. 9, 2023

Normally, when a stock drops nearly 60 percent in just three weeks to yield more than 15 percent, you can bet a dividend cut is on the way. These, however, are no ordinary times in utility world. And a lower payout is far from a foregone conclusion for NextEra Energy Partners (NYSE: NEP). In late September, parent NextEra Energy (NYSE: NEE) cancelled a planned asset sale or “drop down” to Partners, citing tough capital market conditions that didn’t make sense to ignore. To make up for the lost proceeds, it instead announced the $923.4 million sale of its non-core Florida natural gas utility unit to Chesapeake Utilities (NYSE: CPK). And to compensate for the lost revenue to Partners, it cut the affiliate’s projected dividend growth rate to 6 percent from the previous 12 percent.

Hawaiian Electric Cuts, UGI Corp May Be Next

By Roger S. Conrad on Sep. 11, 2023

Hawaiian Electric Industries (NYSE: HE) suspended its dividend last month, saving roughly $158 million if continued over the next year. That’s a key piece of the utility’s defense against a wave of lawsuits resulting from Maui’s devastating wildfire, which wiped out the town of Lahaina and killed upwards of 100 people. Management has also drawn down most of the company’s $375 million in credit lines. And it’s considering restructuring moves including spinning out its American Savings Bank unit.

Strategic Dividend Cuts That Make Sense

By Roger S. Conrad on Aug. 7, 2023

When a company cuts its dividend, its share price usually craters. The exception is if the reduction is part of a larger strategic move that makes sense. That’s the case for Aggressive Holding MDU Resources (NYSE: MDU), which reduced its quarterly dividend for payment in October by -43.8 percent to 12.5 cents per share.

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ABOUT ROGER CONRAD

Roger S. Conrad needs no introduction to individual and professional investors, many of whom have profited from his decades of experience uncovering the best dividend-paying stocks for accumulating sustainable wealth. Roger b