Rates Are Rising Again: Is Emera Still a Sensible Retirement Stock?

Retirement bills don’t take a holiday when interest rates rise.

Electricity still needs paying for, which is why a utility can belong in an income portfolio even when its share price gets knocked around.

The catch is that the company has bills too, and notably, borrowing costs.

I’d want a dividend supported by the customers already paying, with future growth that doesn’t depend on borrowing cheaply forever.

Rate hike on both sides The Bank of Canada raised its policy rate to 2.5% on October 28.

That doesn’t instantly reprice every utility loan, but new borrowing and debt renewals can become more expensive.

Investors can also demand a better yield when deposits and bonds offer more competition for their savings.

A utility has a way to respond through the regulated prices customers pay.

Regulators can permit recovery of certain costs and a return on approved infrastructure.

Timing is the problem.

The company may pay more interest or finish a project well before the new customer rates arrive.

Emera (TSX: EMA) sits directly in that trade-off.

It owns electricity and gas utilities, with major operations including Florida and Atlantic Canada.

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