Is Hydro One Ltd. Leadership Safe From the New PC Government?

Hydro One Ltd. (TSX:H) stock was up 0.76% at the bottom of the noon hour on June 19. Shares have climbed 3.6% over the past month.

Hydro One posted a solid first quarter which should have inspired confidence, but external factors weighed on its stock price. In the first quarter the company reported adjusted earnings per share of $0.35 compared to $0.28 in the prior year. It also hiked its quarterly dividend by 5% to $0.23 per share. This represents a 4.5% dividend yield.

Hydro One has been a political punching bag in Ontario since it was announced that it would go majority private. Since then critics from all political persuasions have condemned the deal itself and/or the leadership at Hydro One. Doug Ford, whose Progressive Conservative party won a decisive majority in the most recent Ontario election, vowed during the campaign to fire CEO Mayo Schmidt and possibly members of the board.

Doug Ford is set to take office this summer, but it is anyone’s guess whether or not he will move forward with his original promise. Mayo Schmidt pointed out recently that the company had churned out an attractive profit while also massaging down rates. If Ford moves to fulfill his populist promise Hydro One stock may take a dive in the short term. Schmidt voiced the concerns of investors in the most recent quarterly report, citing their concern that political meddling had become a lingering problem.

Ford has fashioned himself as the “pro-business” candidate. Throwing one of the largest companies in Ontario into turmoil would likely contradict that platform. Look for Ford and the PCs to backtrack on this incendiary campaign promise.