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American and Israeli jets strike strategic Iranian targets. Another of that country’s leaders is reported to have died. Oil prices surge. Stock markets tumble.
There are reports of back-door U.S.-Iran negotiations. Oil prices drop in anticipation of a ceasefire. Stocks rise.
Iran denies any talks. More missiles are fired. Oil rises. Stocks drop.
This is the pattern we’ve seen since the U.S. and Israel launched their attacks on Iran on Feb. 28. The CBOE VIX volatility index has jumped from 19.86 at the close on Feb. 27 to 31.36 on March 27, an advance of almost 58 per cent. The S&P 500 has dropped from 6,878.88 on the day before the first attacks to 6,368.85 on March 27, a loss of 7.4 per cent.
Trump threatens destruction of Iran’s energy resources if a deal isn’t reached soon
What’s next? Who knows? Much depends on which side of the bed Donald Trump gets up on in the morning and who feels compelled to put a target on his back by purporting to speak for Iran.
What we can assume is that the longer this war goes on, the more anxious investors will become. That will put more downward pressure on share prices. Nasdaq and the Dow are already in correction territory. The S&P isn’t there yet, but it likely will be next week.
If you are nervous about the situation (and who isn’t?) you can reduce the risk in your portfolio by adding low volatility stocks to your mix. Utilities are one of my go-to positions in times like this.
Opinion: In the Iran oil shock, energy superpower Canada must seize the day
The S&P/TSX Capped Utilities Index is up 9.26 per cent year-to-date (March 26) and is down only 0.75 per cent since Feb. 27. It’s a sea of tranquillity in a raging storm.
An easy way to invest in this sector is to buy units of the iShares S&P/TSX Capped Utilities Index ETF (XUT-T). The units are up about 9 per cent so far this year, and the trailing distribution yield is 3.5 per cent.
If you prefer an individual stock, there are several on our recommended list. One of the better performing ones this year is Canadian Utilities Ltd. (CU-T), which was recommended in my Internet Wealth Builder newsletter in May, 2019. It has outperformed the Utilities sub-index so far in 2026, with a gain of 13.1 per cent and has an attractive yield. Here is an update.
Canadian Utilities (CU-T)
Originally recommended on May 20/19 at $37.06. Closed Friday at $48.43.
Background: Canadian Utilities, which is based in Calgary, is a subsidiary of ATCO Ltd. ACO-X-T Its operations include electricity generation, transmission, and distribution and natural gas transmission, distribution and infrastructure development. It also provides energy storage and industrial water solutions and has been heavily investing in green energy projects for over 20 years. Canadian Utilities and its subsidiary and affiliate companies have approximately 8,600 employees and assets of $25-billion.
Performance: The share price is up about 32 per cent in the past 12 months, pulling out of a steep decline that was triggered by interest rate increases by the Bank of Canada that followed the pandemic. The year-to-date gain is about 13.1 per cent.
Recent developments: The company released fourth-quarter and year-end results for 2025, and they weren’t pretty.
Fourth-quarter adjusted earnings were $197-million ($0.72 a share), which was $6-million ($0.02 a share) lower compared to the fourth quarter of 2024. The company was affected by $57-million by the temporary decrease in the regulated 2025 return on equity and other factors.
For the full year, earnings attributable to shareholders were $119-million ($0.15 a share). That was down from $480-million ($1.48 a share) in 2024. The company said earnings were negatively affected by certain non-cash impairments and write-offs.
The company has embarked on a five-year capital expenditure plan for its regulated utilities. This will involve approximately $12-billion in capital spending, which will support a consolidated mid-year rate base CAGR of 6.9 per cent from 2026 to 2030 across the company’s regulated jurisdictions in Canada and Australia. This implies the consolidated mid-year rate base will grow from $16.6-billion in 2025 to $23.2-billion in 2030.
Dividend: On Jan. 8, Canadian Utilities declared a first-quarter dividend of $0.4623 a share or $1.85 on an annualized basis, continuing its 54-year track record of consecutive annual dividend increases. The yield at the current price is 3.8 per cent.
Outlook: Profit in 2025 was affected by several non-recurring factors. The company should generate improved results in 2026 and beyond, implying a continuation of the more than a half century of annual dividend increases.
Action now: I rate the stock as a buy in the current situation. But a warning: If the Iran war drags on and rising fuel prices feed inflation across the global economy, central banks may have no choice but to raise interest rates. As we saw in 2022, that would be bad news for all interest-sensitive stocks, including utilities. So, keep a close watch on developments and act accordingly.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.