3 Reasons to Buy Fortis Stock Now

Fortis is one of Canada’s top dividend-growth stocks. Here’s why the shares deserve to be on your dividend buy list.

| More on:

Fortis (TSX:FTS)(NYSE:FTS) is a leading Canadian utility with $56 billion in assets located in Canada, the United States, and the Caribbean.

Growth

Fortis has a long track record of delivering strong growth through acquisitions and organic projects. The company bought Arizona-based UNS Energy in 2014 for about US$4.5 billion. Fortis then purchased Michigan-based ITC Holdings, a power transmission company, for US$11.3 billion in 2016.

The integration of the UNS and ITC assets went well, and the businesses have performed as expected. With the Canadian dollar strengthening and borrowing costs near record lows, it wouldn’t be a surprise to see Fortis do another deal south of the border in the next year or two.

Internal projects are also part of the growth story. Fortis is working through a $19.6 billion five-year capital program. The company will invest $3.8 billion this year. Fortis completed its Oso Grande Wind Project in May and is making good progress on other initiatives.

In total, Fortis expects the organic developments to boost the rate base from $30.5 billion in 2020 to $36.4 billion by 2023 and $40.3 billion in 2025. Beyond the current portfolio, Fortis is evaluating opportunities across its electric transmission grid in the United States and looking at liquified natural gas (LNG) infrastructure in British Columbia.

Fortis recently entered an agreement with the Canada Infrastructure Bank to fund 40% of the $1.7 billion Lake Erie Connector electric transmission project. All the permits are in place, and Fortis is working on concluding the transmission service agreements. Once that process is complete, the project should get added to the current capital program.

Dividends

Fortis has increased its dividend in each of the past 47 years. That’s a great track record for income investors who hold the stock to supplement pension earnings or for investors who use the distributions to buy new shares and grow their portfolios.

Based on the existing outlook for rate-base growth, Fortis intends to raise the distribution by an average annual rate of 6% through 2025. At the time of writing, the stock trades for close to $57 per share and provides a 3.5% dividend yield. The strong guidance is important for dividend investors and is one reason the stock tends to hold up well when the broader equity market goes through a correction.

Fortis gets the majority of its revenue from regulated assets. This means cash flow is predictable and reliable. People and businesses need to turn on the lights and keep their buildings warm or cool regardless of the state the economy.

Returns

Fortis is one of those stocks you can simply buy now and forget for decades. A $10,000 investment in the stock just 25 years ago would be worth more than $200,000 today with the dividends reinvested.

The bottom line on Fortis stock

Fortis in one of Canada’s top dividend-growth stocks. The company continues to expand its operations and provides investors with great guidance on dividend increases. The share price is not as cheap as it was earlier this year, but Fortis stock still deserves to be a core holding for a buy-and-hold dividend portfolio. Retirees can buy the stock for an income-focused TFSA. Younger investors might want to put Fortis in their RRSP and use the dividends to acquire additional shares.

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.

The Motley Fool recommends FORTIS INC. Fool contributor Andrew Walker owns shares of Fortis.

More on Dividend Stocks

Canadian dollars are printed
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Toronto-Dominion Bank (TSX:TD) stock could do well in the year ahead.

Read more »

monthly desk calendar
Dividend Stocks

Monthly Income: Top Dividend Stocks to Buy in November

Here are two of the best monthly dividend stocks in Canada you can buy in November 2024 and hold for…

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

Hourglass and stock price chart
Dividend Stocks

Goeasy Stock: Is It Heading for a 52-Week High?

Goeasy stock has been edging higher, especially after another record-setting earnings report. So are 52-week highs in sight?

Read more »