Canadian Utilities Limited's 4.75% 2ND PFD HH: A High-Yield Dividend Play in a Low-Yield Market

In a Canadian market where benchmark interest rates hover near historic lows-2.5% as of September 2025, according to the Bank of Canada announcement-income-focused investors are increasingly turning to preferred shares to bridge the gap between safety and yield. Among the most compelling options is Canadian Utilities Limited's 4.75% 2ND PFD HH (CU.PR.J), a preferred share offering a quarterly dividend of $0.296875 per share, translating to an annual yield of approximately 8.07%, according to the company's eligible dividends notice. This analysis evaluates the security's dividend reliability, credit profile, and strategic positioning in a low-yield environment, while addressing risks tied to macroeconomic and regulatory headwinds.

Dividend Reliability: A Track Record of Consistency

Canadian Utilities Limited has maintained an unbroken history of dividend payments, with its 4.75% 2ND PFD HH series distributing dividends on schedule as recently as December 1, 2025, per its dividend history. The company's broader common share dividend of $1.83 annually (4.74% yield) further underscores its commitment to shareholder returns, as shown on the stockinvest dividend page. While historical data for similar preferred shares like Series DD (4.50%) shows a slight decline in dividend growth over the past year, according to a DBRS Morningstar report, CU.PR.J's recent performance remains stable.

The preferred shares are classified as eligible dividends under the Income Tax Act (Canada), offering investors a tax advantage compared to non-eligible dividends, as noted by StockAnalysis. This feature enhances their appeal in a low-yield market, where investors are increasingly prioritizing after-tax returns.

Credit Profile: Strong Fundamentals, Mixed Ratings Landscape

Credit ratings play a pivotal role in assessing the reliability of preferred shares. DBRS Morningstar has assigned a Pfd-2 (high) rating to CU.PR.J, reflecting confidence in the issuer's ability to meet obligations. Fitch affirmed Canadian Utilities Limited's long-term international scale credit rating at 'A-' in February 2025, per Fitch's affirmation. However, specific S&P and Moody's ratings for the 4.75% 2ND PFD HH series remain elusive in public records, according to MarketScreener filings.

Technical analysis on TradingView technicals suggests a short-term "buy" rating for CU.PR.J, driven by positive momentum in moving averages and oscillators. Additional market commentary, including earnings insights, is available in the earnings call highlights. While these indicators are not formal credit ratings, they highlight the security's resilience in a volatile market. Investors should note that the absence of explicit S&P or Moody's ratings for this series may limit its appeal to risk-averse portfolios.

Corporate Developments: Growth and Challenges

Canadian Utilities Limited's 2025–2027 capital expenditure plan of $5.8 billion underscores its commitment to long-term growth, as outlined in the company's investor relations material. Key projects include the $280 million CETO infrastructure initiative (expected to be operational by mid-2026) and the $2.8 billion Yellowhead pipeline, pending regulatory approval, as cited in a StockTrades overview. These projects position the company to capitalize on energy demand in Alberta while diversifying revenue streams.

However, the company faces headwinds, including regulatory uncertainty in Alberta and Puerto Rico, where unresolved discussions on system reliability and tariffs could delay revenue-generating projects. Additionally, customer hesitancy to invest in new generation projects due to regulatory risks may temper near-term growth.

Strategic Positioning in a Low-Yield Market

The Bank of Canada's September 2025 rate cut to 2.5% has amplified the attractiveness of preferred shares like CU.PR.J, which offer yields significantly above the central bank's benchmark. While ETFs such as the BMO Laddered Preferred Share ETF provide diversified exposure to the sector (average yield: 4.90%–5.49%), CU.PR.J's 8.07% yield stands out as a high-conviction play.

Yet, higher yields often correlate with elevated risk. Investors must weigh CU.PR.J's Pfd-2 (high) rating against its exposure to regulatory and macroeconomic volatility. For instance, the company's reliance on Alberta's energy sector-a region grappling with U.S. tariffs and trade uncertainty-introduces potential downside risks.

Conclusion: A High-Yield Option with Caveats

Canadian Utilities Limited's 4.75% 2ND PFD HH offers a compelling combination of high yield, tax efficiency, and a stable dividend history, making it a standout in a low-yield market. Fitch's 'A-' affirmation and TradingView technicals further bolster its reliability. However, the lack of explicit S&P or Moody's ratings for the series and the company's regulatory challenges necessitate a cautious approach.

For investors seeking income generation, CU.PR.J is best suited for intermediate-term portfolios that can tolerate moderate volatility. Diversification across preferred shares and fixed-income instruments, coupled with close monitoring of the Bank of Canada's October 29 rate decision, will be critical to managing risk in this environment.