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How the cost of climate change could pay off
US power companies are required to comply with climate change laws, but these significant costs for some of America’s largest companies could actually bring investors improved dividends.
Charles Fishman, Equity Analyst at Morningstar believes that people should be more selective in how they determine the winners and the losers, as America addresses carbon dioxide emissions.
According to Charles Fishman a common delusion among investors is that utility firms generating power with coal-fired plants could be hurt by future climate change laws. One way of determining whether or not that will happen is to lock at the past to see what happened when similar air-pollution regulations were introduced.
When the Clean Air Act amendments were adopted, utilities had to address sulphur dioxide emissions. Back then, regulators allowed a return to companies that invested money on emission scrubbers, and the firms were ultimately able to not only grow earnings but also raise their dividends.
Morningstar looks at two companies that offer attractive earnings: Southern Company and Wisconsin Energy. Both corporations have received favourable regulatory decisions in the past and Charles Fishman believes the companies will continue to benefit, due to their future planned investment to reduce carbon dioxide emissions. Both companies have paid dividends for years and Charles Fishman expects them to improve their dividend opportunities.
02:13 minutes
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