About my last article discussing Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) as a high-yield stock, some readers gave feedback about the fact that rising interest rates are negative for utilities like Algonquin that have high debt levels because of the nature of their businesses. Rising interest rates imply that their borrowing costs are going to increase, which can dampen their growth.
In contrast to utilities, banks are expected to benefit from rising interest rates. Currently, the highest-yield Big Six Canadian Bank is Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). It yields 4.3% at writing.
Just like its big Canadian bank peers, BNS stock did not cut its dividend through the last two recessions. It did freeze its dividend periodically (like its peers) because of restrictions from the regulatory body, the Office of the Superintendent of Financial Institutions (OSFI), in Canada.
Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) consists of diversified regulated utilities across natural gas, electric, and water utilities, and non-regulated renewable energy across wind, solar, hydro, and thermal generation. Its renewable and clean energy facilities are mostly under long-term contracts (averaging about 13 years) with inflation escalations.
Regulated utility Fortis (TSX:FTS)(NYSE:FTS) has a long dividend-growth streak. It has 48 consecutive years of dividend increases, which is the second-longest streak on the TSX. Because of the transition to net-zero emissions, renewable and clean energy are good places to consider investing in. Algonquin offers the best of both worlds in having regulated utilities and a renewable portfolio.
A dividend stock with a high yield
The dividend stock provides a relatively high yield of 4.8% today. According to the line of thought used in The Single Best Investment by Lowell Miller, 4.8% is a big yield because it’s 1.88 times that of the stock market yield of 2.55%. Miller thinks a yield that’s 1.5 – 2 times that of the market is high.
We would love to wish everyone a Merry Christmas, Happy Holidays, and a Happy New Year! Many years ago, between 6 and 4 BC, Christ was born. Christmas is a special day to celebrate the birth of Christ. For many people, it’s a heartwarming festivity to gather with friends and family to enjoy a great feast and exchange greetings and presents.
“As the well-known story in the Gospel of Matthew goes, three … wise men, followed the Star of Bethlehem to Jerusalem some 2,000 years ago. And after consulting with King Herod of Judea, the men found newborn baby Jesus in the little town of Bethlehem.” (Source) Below is an illustration of this story.
Over here, we’re having a white Christmas. Nothing like a good exercise of shoveling snow in the morning!