Pinnacle may have its request to increase rates rejected by a judge in Arizona and take a hit to its net income. Despite that Simply Safe Dividends believes the utility may have to rely more on capital markets to fund projects but also has a strong balance sheet and credit rating allowing it to ride out any pressures in the next few years.

With less internally-generated cash flow retained in this scenario, the company would need to rely more heavily on capital markets over the next few years to fund infrastructure projects, which could further extend its debt burden.

However, Pinnacle has a strong balance sheet and an A- credit rating from S&P.  The firm is well-positioned to ride out a few years of pressured earnings and increased dependence on the capital markets until its next rate case can be filed.

Until then, Arizona’s relatively strong population and business growth provide a steady demand tailwind to help earnings gradually rebuild and return the payout ratio to healthier levels over time.

Pinnacle’s Pending Rate Case Creates Uncertainty But Dividend Policy Likely to Remain Unchanged (simplysafedividends.com)