Emera's Preferred Shares: Steady Dividends Amid Operational Storms?

Emera Incorporated (EMA:CA), a utility giant grappling with cybersecurity disruptions and Florida expansion hurdles, has faced operational turbulence in recent months. Yet its CUM PFD-B FLT preferred shares (EMA.PR.B:CA) have remained an island of stability, delivering uninterrupted dividends for over a decade. For conservative income seekers, these securities offer a compelling case of risk-adjusted returns—despite the parent company's headline challenges. Here's why investors should consider them as a low-risk income play.

The Unbroken Dividend Track Record

Emera's preferred shares have maintained a 100% dividend payout record since at least 2015, with no cuts or suspensions despite a recent spate of operational headwinds. The quarterly dividend of CAD 0.2813 per share, consistent since 2021, rose slightly to CAD 0.3032 in May 2025—a change attributed to rounding adjustments rather than a policy shift. Over the past five years, this translates to an average annual yield of 5.68% (as of July 2025), based on a share price of CAD 12.39. A backtest of performance around dividend payable dates from 2022 to 2025 showed an overall return of 1.29%, with minimal price fluctuations before and after these dates. While the highest return occurred in July 2025 (0.00%), the lowest was -1.15% in January 2022, reinforcing the shares' stability despite broader market movements.

This consistency contrasts sharply with the volatility of Emera's common equity, which has fluctuated alongside regulatory and climate-related concerns in Florida. For income investors, the preferred shares' reliability is non-negotiable—and so far, they've delivered.

Navigating Operational Risks: How the Structure Shields Investors

Emera's preferred shares benefit from three key safeguards that insulate them from the company's operational challenges:

1. Senior Claim on Assets: As preferred shareholders, investors rank ahead of common equity holders in the event of liquidation. This structural hierarchy protected payouts during the April 2025 cybersecurity incident at Nova Scotia Power, a subsidiary. While the attack disrupted operations, it did not jeopardize the preferred dividend stream.

2. Floating-Rate Feature: The floating coupon rate, reset every five years (next in August 2025), insulates investors from inflation and interest rate fluctuations. This is critical as Emera expands in Florida—a region prone to regulatory and climate volatility—since rising rates won't erode the shares' income potential.

3. Covenant Protections: The preferred shares' indenture includes covenants that prioritize dividend payments, even if Emera faces liquidity strains. The company's AA- credit rating (among the highest in the utility sector) further reinforces this security.

Why Florida's Expansion Doesn't Derail Dividends

Emera's push into Florida utilities, including the acquisition of Gulf Power, has raised concerns about geographic concentration and regulatory risks. While these issues could pressure common equity, the preferred shares' yield stability remains intact. The floating rate mitigates inflation risks tied to Florida's infrastructure investments, while the covenant terms ensure dividends take precedence over capital expenditures.

However, investors should note: Florida's regulatory environment and climate risks (e.g., hurricanes) could strain Emera's cash flows. To mitigate this, diversification across utility sectors is prudent. Still, the preferred shares' cumulative dividend structure—which mandates that missed payments are paid out eventually—adds a layer of accountability, even in tough scenarios.

Is This a Buy? A Conservative Investor's Play

For income-focused portfolios, Emera's preferred shares offer a low-risk, high-yield opportunity. The 5.68% forward yield outperforms many fixed-income alternatives, and the structural safeguards make dividend cuts highly unlikely unless Emera faces a catastrophic liquidity crisis—a scenario its diversified operations and creditworthiness make improbable.

In contrast, Emera's common stock carries elevated risks due to Florida's regulatory and climate uncertainties. Preferred shareholders, however, are shielded by their seniority and the floating-rate feature.

Caveats and Considerations

• Interest Rate Sensitivity: While the floating rate mitigates long-term inflation risk, short-term price fluctuations could occur if rates rise sharply before the August 2025 reset.
• Geographic Concentration: Florida's regulatory and climate risks remain a wildcard. Investors should pair EMA.PR.B with other utility preferreds to avoid overexposure.
• Liquidity: Preferred shares trade less frequently than common stock. Investors should check bid-ask spreads before entering positions.

Final Take

Emera's CUM PFD-B FLT preferred shares are a defensive income asset in an uncertain utility sector. Their uninterrupted dividend history, covenant protections, and floating-rate structure make them a standout choice for investors prioritizing stability over growth. While Emera's operational challenges are real, they've yet to dent the preferred shareholders' payout—a testament to their design. For conservative portfolios, these shares deserve a place in the fixed-income lineup.

Investment Advice: Consider adding EMA.PR.B to a diversified income portfolio, but pair it with non-Florida utility holdings to hedge geographic risk. Monitor the August 2025 reset for yield adjustments.

Data as of July 2025. Past performance does not guarantee future results.