Here’s a Razor-Sharp Dividend Stock That I’ve Been Buying!

Why Fortis Inc. (TSX:FTS)(NYSE:FTS) is a must-own dividend stock at this stage in the market cycle.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

You should treat October’s market correction as a wake-up call if your portfolio took a greater amount of damage as the indices. If your portfolio fell substantially more than that 10% last month, then odds are, you’ve got a portfolio that’s overweight in higher-growth or cyclical stocks and underweight in defensive dividend stocks, which have fallen out of favour over the past year due to the rising interest rate environment.

While a portfolio that’s overweight in cyclical stocks can provide you with amplified returns in an upmarket, potential loss will also be magnified in a down market. So, it’s essential to have a properly balanced portfolio that’ll allow you to achieve the highest risk-adjusted return given the fact that we’re on the tail end of the most extended bull market in history.

But what does a risk-adjusted return mean?

In simplistic terms, it’s a return that’s been adjusted for the amount of risk a security (or portfolio of securities) would expose you to if you were invested in it. Many hedge funds and other actively managed portfolios strive to achieve superior risk-adjusted returns that are ultimately measured by the Sharpe ratio, a metric that considers both return and risk.

In an environment with such high geopolitical risk with an overly hawkish Fed, it’s only prudent to consider valuing stocks that also limit your potential downside rather than just focusing on upside potential. You may be breathing a huge sigh of relief now that October’s over, but we’re not out of the woods yet, as the pain from last month could easily continue until year end.

So, if your portfolio is in need of adjustment, you may want to consider Fortis (TSX:FTS)(NYSE:FTS), a one-stop-shop defensive dividend play that I’ve been pounding the table on over the past year while loading up on it for my personal portfolio.

You may be thinking, “What’s the point of playing defence when the damage has already been done?” Well, we’ve hit a small bump in the market that I believe investors should treat as a portfolio stress test. If a recession does arrive at some point over the next three years, we could realistically see much steeper losses, and you will have wished you’d punched your ticket to Fortis earlier to pad your downside.

Fortis recently clocked in better-than-expected adjusted Q3 earnings of $0.65 per share, up 6.6% on a year-over-year basis. Management was quick to extend its 6% annual dividend-growth promise by another year to 2023. The company continues to put its foot on the growth pedal, and over the next few years, we’re likely to see operating cash flows and regulated debt being funneled towards cash flow-boosting projects.

Foolish takeaway

With Fortis, you’re getting a rock-solid dividend, a promise of dividend growth, and a growth profile that would put most other highly regulated utilities to shame. Higher rates are a burden for the company, but when you consider the discount slapped on shares at $43, I’d say the stock is a must-own when you consider where we’re at in the market cycle.

Stay hungry. Stay Foolish.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Enbridge wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of FORTIS INC.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

coins jump into piggy bank
Dividend Stocks

How to Use Your TFSA to Earn $1,057/Year in Tax-Free Income

Investing $5,000 in each of these high-yield dividend stocks can help you earn over $1,057 per year in tax-free income.

Read more »

Man in fedora smiles into camera
Dividend Stocks

How I’d Build a $20,000 Retirement Portfolio With These 3 TSX Dividend All-Stars

If you're worried about returns and want to focus on dividends, these dividend stocks are the first to consider.

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

If I Could Only Buy and Hold a Single Canadian Stock, This Would Be It

Here's why this high-quality defensive growth stock is one of the best Canadian companies to buy now and hold for…

Read more »

Concept of multiple streams of income
Dividend Stocks

3 Safe Dividend Stocks for Retirees

These three Canadian stocks are ideal for retirees due to their solid cash flows, consistent dividend growth, and healthy growth…

Read more »

dividends can compound over time
Dividend Stocks

3 Canadian Market Leaders Where I’d Invest $10,000 for Sustained Performance

Market leaders like Alimentation Couche-Tard Inc (TSX:ATD) are worth an investment.

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Allocate $12,000 Across Canadian Value Stocks for Retirement Planning

Suncor Energy Inc (TSX:SU) is a Canadian energy stock worth investigating.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Stocks You Can Buy Now and Get Monthly Payouts From for Decades

Are you looking for monthly payouts? There are more than a few great investments that can fuel a monthly income…

Read more »

e-commerce shopping getting a package
Dividend Stocks

Where I’d Put $1,000 Right Away in 2 Top Canadian Stocks for Growth

These two Canadian stocks are strong options and have been for decades, and that's not going to change anytime soon.

Read more »