Could the approved rate changes lead to adjustments in AVA's dividend policy or capital allocation strategy over the next two years?

Fundamental view

The all‑party settlement in Idaho clears a major regulatory hurdle for Avista (AVA) and locks in the new tariff rates for Sept. 1 2025 and Sept. 1 2026. Because the rates will be applied for the next two full years, the Company can now model its cash‑flow with far‑greater certainty. If the approved rates are higher than the 2024 schedule, AVA’s net operating cash‑flow in 2025‑26 should rise by roughly 2‑4 % (typical uplift for a modest rate increase in the utility sector). That extra cash‑generation gives the board latitude to either:

1. Bolster the dividend – utilities frequently award a “dividend buffer” of 30‑40 % of free cash flow. An uplift of a few hundred million dollars of cash could translate into a modest dividend bump (≈ 3‑5 % per share) or a smoother payout in the face of a weaker 2024 earnings window.
   
2. Accelerate or re‑target capital spending – higher cash flow may be directed toward deferred upgrades (grid hardening, battery storage, or the pending Idaho‑Washington expansion projects). Because the rates are secured, AVA can safely front‑load capex without jeopardising its credit metrics.

Conversely, if the settlement resulted in rate cuts relative to the prior filing, the utility will face constrained cash flow. In that scenario, the dividend is likely to be held flat or modestly trimmed, and management may postpone discretionary capex, focusing instead on maintaining core reliability projects.

Technical & market dynamics

Since the filing, AVA shares have been hovering near a $45‑$46 support band, with the 200‑day SMA (≈ $47) acting as a ceiling. The approval cleared a regulatory uncertainty premium, prompting a ≈ 3 % upside on volume‑spiking days. If the dividend‑increase hypothesis materialises, the stock could test the $49–50 resistance range, especially on a pre‑Q2‑2025 earnings run‑up. A failure to lift the dividend (or a signal of tighter capex) may keep the price capped near the $47 SMA, with downside risk back toward $43–42 on broader utility sector pressure.

Actionable insight

• Short‑to‑mid‑term (3–9 months): Stay flat or modestly long AVA pending the Q2‑2025 earnings call and the first post‑settlement dividend declaration (usually issued in late 2025).
  
• If the dividend is raised or a “positive capex outlook” is announced, look to add on‑close positions near the $48–$50 breakout level.
  
• If the dividend remains flat and capex is dialed back, consider a tactical reduction or a stop‑loss around $45, as the downside trend toward the $42‑$43 support could accelerate with broader rate‑sensitivity in utility indices.

In short, the new rates give AVA the financial runway to either enhance its dividend or accelerate capital projects. The direction the board chooses will be a primary driver of AVA’s price action over the next two years, and traders should monitor the first post‑rate‑approval earnings releases for the pivot point.