Fortis (TSX:FTS) Is the Core Defensive Holding

Fortis (TSX:FTS)(NYSE:FTS) is often mentioned as a core defensive holding suitable for nearly every portfolio. Here’s why you should consider Fortis now.

| More on:

Fortis (TSX:FTS)(NYSE:FTS) is one of the best long-term options on the market.  The stock appeals to investors both as an income producer and as a growth driver. This is just part of the reason why Fortis is a great core defensive holding for any portfolio.

What makes Fortis a core defensive holding?

There are plenty of utilities on the market. Many of them offer a handsome dividend, just like Fortis. Others have already expanded heavily into the field of renewables at a faster pace than Fortis. So what exactly sets Fortis apart from its peers? Let’s answer that by mentioning several key points.

First, let’s take a moment to acknowledge Fortis’ size. The company is one of the largest utilities in North America. The company boasts 10 different utility operations across Canada, the U.S., and the Caribbean. In total, those operations consist of over $56 billion in assets that collectively serve over 3.3 million customers.

In other words, the sheer size and reach of Fortis provide a stable revenue base for investors.

Speaking of revenue, let’s now focus on utilities such as Fortis generate it. Fortis’ assets are 99% regulated. Those facilities are bound under long-term contracts that provide a steady stream of recurring revenue in exchange for providing utility service. Furthermore, those regulated long-contracts can often span decades. This only adds to the stability of the already impressive business model.

One final point to mention is Fortis’ dividend. Fortis provides investors with a quarterly dividend. The current yield works out to 3.90%, which is not the highest yield on the market but is one that is both respected and sustainable.

In fact, Fortis’ not-so-exciting dividend is one of the best-kept secrets on the market. The company has provided consecutive annual bumps to that dividend for well over four decades. The company plans to continue that cadence in 2021, which will mark the 48th consecutive annual bump.

That factor alone makes Fortis a great core defensive holding for nearly any portfolio.

What about results?

Fortis is set to provide investors with an earnings update for the fourth fiscal of 2020 next month. Until then, we can take a look at how the company fared in Q3.

In that quarter, Fortis reported net earnings of $292 million, reflecting a $14 million increase over the same period in 2019. On an adjusted basis, the company earned $302 million. This also reflected slight a bump over the same period last year, when Fortis reported $287 million.

One interesting point of mention is Fortis’ capital plan. The company continues to set aside funds to be used for both upgrading and transitioning facilities over to renewable energy. As of the most recently reported quarter, Fortis had spent $2.9 billion on those initiatives in 2020. More importantly, the five-year capital plan allotment comes in at a whopping $19.6 billion.

Those initiatives will keep both growth and dividend growth top of mind. Once again, this feeds into the view that Fortis makes a great defensive core holding.

Should you buy Fortis?

Fortis is a great long-term investment. The company operates in a stable segment is well diversified and continues to invest in strong long-term growth initiatives. In my opinion, Fortis is a great long-term investment that should be a core defensive holding for nearly every portfolio.

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 Demetris Afxentiou owns shares of Fortis Inc.

More on Dividend Stocks

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »