Investment Q&A

Utilities companies typically have high debt loads given their need to continuously spend on CAPEX, and given this, higher interest rates can negatively impact utilities companies. Utilities companies have a high ability to pass on inflation to their customers, and this gives them some leeway in their capacity to continue taking on debt and sustaining dividend payments. We would consider most utilities stocks' dividends to be safe in a rising interest rate environment, however, much depends on how high rates go, and how much this impacts their high debt levels. In the intermediate term, we do not feel there is a high risk that ZUT slashes its distributions, although, if rates stay consistently high for multiple years, this could impact utility companies' profitability, but we feel their dividends are largely safe for now.