Dividends and Washington State rejects Hydro One’s Avista deal

When a dividend buyer looks to buy a utility the companies tend to be conservative in their management and operations. The generation of electricity by hydro, gas, oil or nuclear is reasonably secure and safe, as long as there were no cost overruns in the building, the operations are relatively non eventful. The utility has a near monopoly over customers and they have little choice but to buy power and all those bills ensure the utility ensures a tidy profit and generally can increase its dividend. It is not unusual to find companies which have increased their dividends over many years.

It was very unusual to read an article by David Milstead that Washington State regulators examined a new government in Ontario and said the Ontario company Hydro One should not be able to buy Avista which has operations in 5 western states. The Boards of each company had approved the merger, however an election happened. According to Mr. Milstead the Premier of Ontario fired the CEO, changed the Board, 6 independent directors had to hire an outside lawyer to deal with the Premier’s office and other consideration. It is as if the Premier and his people had never dealt with the ramifications of doing whatever you want. Fortunately, the Washington State regulators said, if you are willing to do those things to the parent, what would you do to the subsidiary?

As we go into the new year, the company has asked the regulatory body to review its decision, we shall if a new result is decided.

Linking to dividend paying stocks, one of the reasons you buy them is the stability of both management, the government which regulates them and government which encourages the company to do the good things that are suppose to help voters. When those pillars fall apart, it is time to look at alternatives till the politics settles down.

There are more questions than answers, till the next time – to raising questions.

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