TransAlta Corp (TSX: TA, NYSE: TAC) has cut its quarterly dividend by 37.9 percent to 18 cents Canadian, starting with the April 1 payment. The new level is low enough to maintain at least the next couple years. As a result, I’m removing the company from the Endangered Dividends List.
With large financial institutions and exchange-traded funds (ETFs) dominating daily trading, markets are as volatile as ever.
Fortunately, the key to success in utilities and essential services is the same as it’s been for more than a century: Spotting where investment will earn a fair return, and following the money to a rising stream of dividends.
Barring a real financial earthquake, this will be the ninth year of rising interest rates since 1992.
2013 will also be the eighth of those nine that utilities and other dividend paying stocks finished in the black. The only exception was 1994, when deregulation fears upended electricity and communications.
Utilities also rose eight years when rates fell. All their biggest declines, however, were during years of falling interest rates, particularly 2008.
Utility stock prices ultimately reflect the health of underlying companies. Stocks of financially healthy companies with growing dividends always move higher. But when an economic calamity brings interest rates lower quickly, they can drop in a hurry.
Taper talk is heating up again as Federal Reserve Chairman-in-waiting Janet Yellen’s fate is debated on Capitol Hill. Rate hike speculation, however, is having much less impact on essential services stocks than it did this past spring. And one big reason is strong third quarter results.
Taper talk is rife again in the financial media. And the all-too-familiar consensus is still that the Federal Reserve will abandon cheap money in the near future, driving up interest rates and sending dividend-paying stocks plummeting.
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Warning: Falling Dividends.
Roger's current take and vital statistics on more than 200 essential-services stocks.