46 Consecutive Years of Dividend Increases! Why You Should Buy Fortis (TSX:FTS) Today

Why Fortis Inc (TSX:FTS)(NYSE:FTS) stock looks like a safe long-term bet for investors.

| More on:

There are a few companies that just stand up and say, “Buy me.” Fortis (TSX:FTS)(NYSE:FTS) is one of them. The company announced a fourth-quarter 2019 dividend increase of 6.1%, marking 46 consecutive years of increases.

Fortis is targeting an average annual dividend-growth target of 6% through 2024. With a beta of 0.05, this stock is the perfect counterfoil to a volatile market. Fortis is a major energy and utility player in North America with 10 operations in the United States, Canada, and the Caribbean, that clocked revenues of $8.4 billion in 2018 and assets of around $52 billion.

The revenue split up for Fortis is 82% from electric energy, 17% from gas and 1% from renewable energy. A major factor why the company can commit to 5-6% dividend growth annually is because Fortis makes most of its revenues from regulated assets.

It doesn’t matter if it’s the bulls or bears calling shots in the market, the cash flow for Fortis is predictable and assured. With a 3.3% dividend yield at present, 6% annualized growth until 2024 sounds pretty good.

LNG export contract with China

Fortis became the first Canadian company to have an LNG export contract with China. In the second-quarter earnings call, the company confirmed that it has entered a two-year supply agreement to export 53,000 tonnes of LNG to China per year.

On September 10, 2019, Fortis announced its five-year capital-investment plan of $18.3 billion for the period 2020 to 2024 — an increase of $1 billion from the prior year’s plan. The plan outlays a whopping 99% of investments into regulated assets. Virtually all planned capital investments are occurring at its regulated utility businesses and consist mostly of a diversified mix of highly executable, low-risk projects.

Consolidated rate base is estimated to increase from $28 billion in 2019 to $34.5 billion in 2022 and $38.4 billion in 2024. This indicates a three-year and five-year compound annual growth rate of 7.2% and 6.5%, respectively.

As we had reported earlier this month, the company’s earnings per share are also estimated to grow by 2.4% in 2019, 7.8% in 2020 and at an annual rate of 4.7% in the next five years. Fortis’s forward price-to-earnings multiple is 20.06 and suggests it is slightly overvalued, but if the economy goes into a recession (as a lot of pundits claim it will), Fortis is a good hedge in your portfolio.

Fortis stock has gained over 31% in the last 12-month period, easily outperforming peers and broader indices. The stock is trading at $55.76, which is 37% above its 52-week low and 1.5% below its 52-week high. Analysts covering Fortis have a 12-month annual target price of $56.72. This shows Fortis shares are trading at a discount of 1.7% from its current price.

The verdict

Fortis is a great stock for those who are planning their retirement. If the market goes into a sudden downturn, expect Fortis to hold strong. The fall in its shares won’t be as steep as other companies. Keep this point in mind: Fortis beat the broader indices in the last two recessions. There’s no reason to believe that it won’t do so a third time.

You want companies that are not volatile, that you can count on, and those that pay you a regular dividend. Fortis ticks all boxes. Fortis is a wine that gets finer with age.

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 Aditya Raghunath has no position in any of the stocks mentioned.

More on Energy Stocks

Pumpjack in Alberta Canada
Energy Stocks

Is Cenovus Energy Stock a Good Buy?

Cenovus Energy (TSX:CVE) stock is primed for capital gains and strong total returns in 2025, driven by strategic buybacks and…

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

2 High-Yield Dividend Stocks That are Screaming Buys Right Now

Natural gas stocks like Peyto Exploration and Development are yielding above 7% today and look undervalued as natural gas strengthens.

Read more »

chart reflected in eyeglass lenses
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Cenovus?

Want to invest in Canadian energy? Canadian Natural Resources and Cenovus Energy are two of the largest, but which one…

Read more »

oil pump jack under night sky
Energy Stocks

Where Will Cenovus Stock Be in 1/3/5 Years? 

Let's dive into whether Cenovus (TSX:CVE) stock is worth buying right now and where this stock could be headed over…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Suncor?

These energy giants are returning significant cash to shareholders.

Read more »

how to save money
Energy Stocks

This 7.8% Dividend Stock Pays Cash Every Month

This monthly dividend stock is an ideal option, with a strong base, growing operations, and a strong future outlook.

Read more »

data analyze research
Energy Stocks

The Smartest Dividend Stocks to Buy With $2,000 Right Now

Dividend stocks like Canadian Natural Resources (TSX:CNQ) can amplify your wealth.

Read more »

oil pump jack under night sky
Energy Stocks

3 Must-Buy Energy Stocks for Canadians Before the Year Ends

There are a lot of energy stocks out there to consider, but these three have to be the best options…

Read more »