When rates of interest rise, revenue buyers get nervous. Bond yields begin to look extra engaging, and lots of dividend shares lose their shine. However that’s precisely once I search for secure companies that provide a robust yield with the potential for long-term progress. One dividend inventory that checks all these bins 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 primarily based in Edmonton that owns and operates energy technology amenities throughout North America. It has about 7,500 megawatts of energy capability both in operation or below development. These property are unfold throughout thermal and renewable sources, giving the corporate a balanced and diversified profile. That’s a giant plus once you need regular efficiency in a altering financial surroundings.
The dividend inventory has been quietly beating expectations. As of writing, Capital Energy is up round 40% within the final yr, considerably outpacing the broader TSX index. It’s not laborious to see why. The dividend inventory continues to develop its portfolio, keep strong 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 yr. 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 steering for the complete yr, suggesting confidence in its skill to climate financial uncertainty and potential charge modifications. Working money circulate stays robust, and so does its dedication to capital self-discipline.
One of many predominant causes to purchase Capital Energy now’s its dividend. The dividend inventory presently affords a yield round 4.6%, which is paid out quarterly. That’s a lot increased than the typical dividend on the TSX and gives a gentle stream of revenue. And since the dividend inventory operates in a regulated and extremely obligatory business of electrical energy, there’s robust visibility into future earnings. Energy demand isn’t going away, and Capital Energy is true in the course of assembly that want. Proper now, a $10,000 funding might 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 progress to the desk. The dividend inventory is investing closely in renewable vitality, with a number of wind and photo voltaic initiatives both in progress or just lately accomplished. That offers it a long-term progress angle many conventional utilities don’t have.
There are, in fact, dangers. If bond yields surge shortly, buyers would possibly flee dividend shares for safer authorities bonds. And if vitality costs fall or demand weakens, earnings might take successful. However Capital Energy has proven it will possibly navigate these modifications. It makes use of hedging contracts to easy out income, and maintains a mixture of regulated and service provider property that assist cut back volatility.
One other key level is that the corporate shouldn’t be overloaded with debt. Whereas utilities typically carry increased debt hundreds, Capital Energy’s monetary place stays manageable. It maintains investment-grade credit score rankings and has a transparent plan to fund its future progress. That features disciplined capital spending and a give attention to 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 may increasingly get dearer. Buyers will begin chasing protected dividend revenue once more, and dividend shares like Capital Energy might see share costs transfer increased. 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 wise steadiness of revenue, progress, and stability in a sector that isn’t going out of favor anytime quickly.
