Like most all utilities, Capital Power is under some pressure from rising rates.
Our growth and dividend safety scores on Capital Power reflect lower than expected growth rates when compared to companies like Emera or Fortis. However, it is key to note that these growth estimates are from analysts.
I'm surprised that estimates haven't been revised upwards, especially because during its December investor day the company reported it is going to be hitting the upper ends of its guidance and expects relatively strong growth in 2023.
In terms of the dividend safety score, for the most part its flashing a bit of a warning for two reasons. For one, the company hasn't put up many years of consecutive earnings growth. This isn't that surprising as a utility as EPS can fluctuate wildly. Secondly, the company's payout ratio is about 160% of earnings. This doesn't paint the whole picture, as the dividend is well covered by funds from operations and free cash flow. So, I would say that its dividend safety is a bit underrepresented by our screener. It's well covered and growing at a decent pace. The company expects mid single digit dividend growth moving forward through 2025.
I actually think Capital Power is one of the more attractively valued utilities at this moment in time if it can hit its targets. Again, analysts remain relatively bearish on the company's growth profile moving forward so that is why it doesn't score very well on our growth grade.