Bet on Utilities if the BoC Slashes Rates

In its late May meeting, the Bank of Canada elected to maintain its overnight rate target at 1.75%. Domestic economic conditions have improved since late 2018 and the first quarter of 2019, but broader risk remain due to the global trade situation. Traders in the swaps market are betting that the BoC will move to cut interest rates if the U.S. Fed moves to slash its own benchmark.

A softening rate environment continues to be a bullish sign for wide moat dividend stocks. Utilities have fared especially well in 2019.
Fortis (TSX:FTS)(NYSE:FTS) is a St. John’s-based utility holding company, one of the largest in Canada.

Shares have climbed 14.6% in 2019 as of late morning trading on June 17. Fortis has committed to a huge investment into the next decade to dramatically boost its rate base. It expects that this will support dividend-growth into 2023.

Fortis currently offers a quarterly dividend of $0.45 per share, which represents a 3.4% yield. The company has achieved dividend-growth for 45 consecutive years.

Hydro One (TSX:H) is a utility that services the province of Ontario.

Shares have climbed 12.9% in 2019 as of this writing. The stock had sputtered since reaching all-time highs in the summer of 2016, but the scuttling of the Avista deal has provided it with momentum not seen in over two years. It boasts a monopoly in the country’s largest province and has a reinvigorated balance sheet.

Hydro One last increased its quarterly dividend to $0.2415 per share. Even after its first half run up it still boasts an attractive 4.2% yield.