When rates of interest rise, revenue buyers get nervous. Bond yields begin to look extra enticing, and plenty of dividend shares lose their shine. However that’s precisely once I search for secure companies that provide a powerful yield with the potential for long-term development. One dividend inventory that checks all these containers proper now’s Capital Energy (TSX:CPX). If I had $10,000 to take a position earlier than bond yields spike once more, that is the place I’d put it.
About Capital Energy
Capital Energy is a utility firm based mostly in Edmonton that owns and operates energy era services throughout North America. It has about 7,500 megawatts of energy capability both in operation or underneath building. These belongings are unfold throughout thermal and renewable sources, giving the corporate a balanced and diversified profile. That’s a giant plus if you need regular efficiency in a altering financial setting.
The dividend inventory has been quietly beating expectations. As of writing, Capital Energy is up round 40% within the final 12 months, considerably outpacing the broader TSX index. It’s not laborious to see why. The dividend inventory continues to develop its portfolio, keep stable margins, and ship money to shareholders, all whereas investing sooner or later.
Into earnings
Within the first quarter of 2025, Capital Energy posted income of $988 million, a notable enchancment from the identical time final 12 months. Web revenue got here in at $116 million, or $0.88 per diluted share. This was a rise from $114 million, or $0.84 per share, within the first quarter of 2024. The dividend inventory additionally reaffirmed its steerage for the total 12 months, suggesting confidence in its potential to climate financial uncertainty and potential fee adjustments. Working money circulate stays robust, and so does its dedication to capital self-discipline.
One of many most important causes to purchase Capital Energy now’s its dividend. The dividend inventory at present affords a yield round 4.6%, which is paid out quarterly. That’s a lot greater than the common dividend on the TSX and gives a gentle stream of revenue. And since the dividend inventory operates in a regulated and extremely mandatory trade of electrical energy, there’s robust visibility into future earnings. Energy demand isn’t going away, and Capital Energy is correct in the course of assembly that want. Proper now, a $10,000 funding may herald $464 in annual revenue!
| COMPANY | RECENT PRICE | SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CPX | $55.95 | 178 | $2.61 | $464.58 | Quarterly | $9,962.10 |
Extra to return
Utilities like Capital Energy are likely to carry out nicely in unsure markets as a result of they’re thought-about defensive shares. Individuals nonetheless want warmth, mild, and electrical energy it doesn’t matter what’s taking place with rates of interest or inflation. However this utility additionally brings development to the desk. The dividend inventory is investing closely in renewable power, with a number of wind and photo voltaic tasks both in progress or just lately accomplished. That provides it a long-term development angle many conventional utilities don’t have.
There are, after all, dangers. If bond yields surge rapidly, buyers would possibly flee dividend shares for safer authorities bonds. And if power costs fall or demand weakens, earnings may take a success. However Capital Energy has proven it may navigate these adjustments. It makes use of hedging contracts to clean out income, and maintains a mixture of regulated and service provider belongings that assist cut back volatility.
One other key level is that the corporate just isn’t overloaded with debt. Whereas utilities typically carry greater debt masses, Capital Energy’s monetary place stays manageable. It maintains investment-grade credit score scores and has a transparent plan to fund its future development. That features disciplined capital spending and a concentrate on sustaining the dividend.
Backside line
So why act earlier than bond yields rise? As a result of as soon as they do, alternatives like this will likely get dearer. Traders will begin chasing protected dividend revenue once more, and dividend shares like Capital Energy may see share costs transfer greater. By getting in now, you possibly can lock in a better yield and set your self up for long-term revenue and capital appreciation.
If I had $10,000 to place to work earlier than yields rise, Capital Energy could be my alternative. It’s a sensible stability of revenue, development, and stability in a sector that isn’t going out of fashion anytime quickly.
