Emera's Preferred Shares: A Steady Hand in Volatile Markets

Emera Incorporated's Series J Preferred Shares (EMA.PR.J:CA) have emerged as a reliable income generator for conservative investors, backed by a consistent dividend track record and the stability of the company's utility operations. With the latest dividend declaration of $0.265625 per share on July 11, 2025, the shares continue to deliver on their 4.25% annualized yield, while navigating macroeconomic headwinds with resilience.

Dividend Consistency: A Foundation of Trust

The Series J Preferred Shares have maintained unwavering quarterly distributions since their issuance, with the most recent declaration on July 11, 2025, aligning perfectly with the April 2025 payout. Both set the dividend at $0.265625 per share, payable to holders of record as of August 1, 2025. This consistency underscores Emera's commitment to its dividend covenant, a critical factor for income-focused investors.

The shares' cumulative structure further bolsters reliability: any missed dividend payments must be made up before common shareholders receive distributions. This feature, combined with Emera's AA- credit rating, ensures preferred shareholders sit atop the priority ladder.

Tax Efficiency: A Canadian Advantage

Investors in Canada benefit from the Series J dividends being classified as eligible dividends, which receive preferential tax treatment under the Income Tax Act. This distinction lowers the effective tax burden for individual holders, making the shares more appealing than non-eligible alternatives. For instance, a $1.0625 annual dividend (the Series J's payout) would retain more of its value post-tax compared to a non-eligible dividend of the same size.

Utility Stability: Anchored in Regulated Monopolies

Emera's utility subsidiaries—Nova Scotia Power, Tampa Electric, and others—operate under regulated monopolies, ensuring steady cash flows even in volatile markets. Recent financial results highlight this stability:
- Q1 2025 Adjusted EPS surged 68% year-over-year to $1.28, driven by rate increases and favorable weather.
- Normalized operating cash flow rose 37%, underpinning debt reduction and dividend sustainability.

Regulatory settlements, such as the Nova Scotia Power rate agreement and Tampa Electric's 2021 rate case, have locked in predictable returns. While Florida's population growth has moderated, Emera's $3.4 billion annual capital plan focuses on reliability upgrades and renewable energy projects, ensuring long-term cash flow resilience.

Yield Attractiveness: Outperforming Peers and Benchmarks

At a current price of CAD 25.00, the Series J shares offer a 4.25% annual yield, exactly matching their coupon rate. This compares favorably to:
- The S&P/TSX Utilities Index, which yields 3.8% as of July 2025.
- 10-year Canadian government bonds, yielding 3.1%—a stark contrast for income seekers.

Even when considering the 5.72% indicated yield (based on recent price dips), the shares remain compelling. Historically, the Series J's yield has averaged 4.5% since 2020, with minimal volatility due to its five-year rate reset feature (next in 2026). This mechanism allows Emera to adjust payouts if market conditions shift, ensuring competitiveness.

Risk Considerations and Investment Thesis

While risks like rising interest rates or regulatory delays exist, the Series J's cumulative and reset features mitigate these concerns. The next redemption date (May 15, 2026) introduces some uncertainty, but Emera's strong balance sheet suggests it may defer redemptions if rates fall.

Investment Recommendation:
The Series J Preferred Shares are ideal for conservative portfolios seeking stable income. Their tax efficiency, dividend reliability, and underpinning by regulated utilities make them a standout option in a low-yield world.

Hold for: Investors targeting a 4-6% yield with minimal principal risk. Avoid if seeking high growth or liquidity in volatile markets.

In a landscape of economic uncertainty, Emera's preferred shares offer a rare blend of income security and tax-smart returns. For those prioritizing stability, this is a position worth building.