Why Canadian Utilities Are Now Profitable and Worth a Hard Look

Canadian utility stocks have quietly transformed from “boring” income plays into compelling candidates for both yield and total return, thanks to market and economic shifts that favour their business models. These companies operate regulated electricity, gas and infrastructure networks where pricing power is supported by long-term rate frameworks, helping deliver predictable cash flows and growing earnings even when macro conditions are choppy.

At the core of this trend is the fact that utilities often benefit from rising interest rates and inflation-linked cost recoveries. As central banks maintain elevated rates to combat price pressures, many regulated utility rate structures allow these businesses to adjust prices to reflect higher financing costs and replacement capital expenditures. That means utilities can protect and often expand margins in environments where other sectors struggle to pass on costs to customers.

Take Fortis (FTS.TO), for example. As a diversified utility with operations across Canada, the U.S. and the Caribbean, Fortis earns most of its returns through regulated rate bases. These rate bases are adjusted over time to include new infrastructure investments, which spreads cost recovery over many years and supports dividend increases. Despite being a traditional utility holding for many income-focused investors, Fortis now also offers a degree of growth through its capital expansion programs.

Similarly, Emera (EMA.TO) has leveraged its mix of regulated electric and gas utilities, along with strategic infrastructure assets, to generate steady cash flow. Because these businesses serve essential services — electricity and heat — demand stays relatively inelastic, meaning customers need the service regardless of broader economic slowdowns. That resilience translates into stable earnings and dividend coverage even when risk assets elsewhere are under pressure.

Also Read: Long term investing in Canada

These utility stocks have also become more attractive as dividend yield anchors in portfolios where fixed-income rates are higher than they’ve been in years. The tax-advantaged compounding inside retirement accounts like TFSAs and RRSPs further enhances their after-tax returns over long horizons.

Also Read: Dividend paying stocks Canada

Of course, regulated utilities face risks: regulatory decisions can lag market changes, construction and financing costs can pressure returns, and political shifts can influence allowed rate adjustments. Still, for investors targeting lower volatility, dependable dividends, and gradual growth, Canadian utilities now offer more than just yield — they provide a reliable earnings runway supported by essential infrastructure and favourable regulatory economics in 2026 and beyond.