Canadian Utilities Limited (OTCPK: <a href="https://seekingalpha.com/symbol/CNUTF" title="Canadian Utilities Limited 2ND PFD SER DD" target="_blank">CNUTF</a>) recently held their Q3 2018 earnings call, and while the overall performance appeared positive, a subtle yet important detail emerged from the transcript. This overlooked clue suggests a possible change in strategy that could create substantial value for shareholders, potentially leading to a significant dividend increase soon.

The key takeaway lies within the company's ongoing strategic review of its merchant power business. Although the possibility of selling these assets has been known for a while, CEO Dennis DeChamplain's replies to analyst inquiries during the earnings call pointed to a calculated plan focused on maximizing returns for shareholders.

When asked about the potential use of funds from a prospective sale, DeChamplain stressed adaptability and a commitment to evaluating all options. He specifically mentioned the possibility of a special dividend – a statement carrying considerable weight given the company's emphasis on dividend growth.

This change in approach is crucial. While a special dividend has always been a theoretical option, DeChamplain's direct mention of it as a practical possibility suggests the company is actively considering this route. This shift suggests Canadian Utilities might prioritize immediate shareholder returns over long-term reinvestment, at least regarding the merchant power business.

"Several factors support this idea. First, Canadian Utilities' core regulated utility operations continue to produce strong cash flows, offering a stable base for the current dividend and possibly even higher regular payouts. Second, the company's recent venture into natural gas conversion projects, such as the Pembina-Keephills pipeline, shows dedication to using existing infrastructure and knowledge for future growth, potentially lessening the need for significant acquisitions."

Moreover, the company's consistent success in effectively handling its balance sheet and keeping excellent investment-grade credit ratings provides the financial flexibility to pursue a large shareholder return initiative like a special dividend.

Potential Special Dividend Impact

While predicting the exact size of a potential special dividend is premature, a rough estimate using hypothetical numbers from a potential sale of the merchant power business presents an interesting possibility. Assuming a $2 billion sale price and a 50% payout ratio for a special dividend, shareholders could receive a one-time payout of roughly $4 per share. This approximation, naturally, doesn't account for tax implications or other uses for the proceeds.

Remember, this is still a hypothesis based on subtle interpretations of executive comments and preliminary calculations. Nevertheless, the chance of a considerable dividend windfall is an attractive possibility for investors. Canadian Utilities has a record of rewarding its shareholders, and this strategic review, combined with the company's strong financial position, could set the stage for a substantial return of capital.

"Fun Fact: Did you know that Canadian Utilities has increased its dividend for 46 consecutive years? This makes it one of the longest dividend-growth streaks in Canada, demonstrating a strong commitment to shareholder value."