RE:RE:RE:The Dividend will be cut Guaranteed !! RayDonovan78 wrote: I respectfully disagree. I have not crunched the #'s but they are not going to pay a 7-8% dividend for too long with higher interest rates on debt.
In regulated utilities, most of the interest costs get passed on to customers. There is a timing difference before it's built in rates, so it's not immediate, but long term the interest costs don't affect significantly the cashflow generation on the regulated utilities side (which is 85% of their business). Hence, the interest rates on the debt for regulated utilities have no material effect on the dividend policy.
The main reason for cutting the dividend for a regulated utility would be to raise additionnal capital for new investments. That said, it almost never happens because the rate of return on capital spent for a regulated utility needs to match the cost of capital (so debt and equity), so it's almost always favorable to keep the dividend flowing and to raise additional equity.