Because there are so many stocks on the TSX to choose from, and because each investor has their own personal preferences, goals and risk tolerances, everyone’s portfolio will be different. However, at the same time, there are a handful of high-quality Canadian stocks that essentially every investor would be happy to own, with one of the most popular being Fortis (TSX:FTS) stock.
Fortis is one of the best and most popular stocks in Canada due to its reliability as a low-risk stock, its track record of execution that’s spanned multiple decades and the attractive dividend it offers to investors.
However, as high-quality of a stock that Fortis is, and as popular as it has been over the years, now may be one of the best times to buy the utility stock.
So, if you have cash on the sidelines and are looking for a high-quality, long-term investment to make, or if you’ve been watching Fortis and waiting to pull the trigger, here are three reasons to buy the high-potential Dividend Aristocrat like there’s no tomorrow.
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As interest rates begin to peak, Fortis stock should start to rebound
One of the reasons a high-quality utility stock like Fortis is so popular and why it’s known to be so reliable is that utility stocks are highly defensive.
Despite a weakening economy, the fact that Fortis offers essential services and the rates it charges are set by the government, Fortis should continue to generate a profit and significant cash flow year in and year out, one of the reasons it’s such a dependable investment.
The one environment that can cause the stock to sell off, though, is when interest rates are rising. Rising interest rates make Fortis’s debt more expensive to service, which will impact its profit margins.
In addition, rising rates cause dividend stocks like Fortis to lose value as other passive income-generating investments become more attractive due to the higher yields they now offer.
However, now with inflation finally appearing to be under control and both the Bank of Canada and Federal Reserve looking like they are nearly finished raising interest rates, the few headwinds Fortis stock is facing are subsiding, creating the potential for a significant rally.
In this uncertain market environment, Fortis is the perfect stock to protect your capital
When the market is experiencing so much uncertainty, and the economy could still enter a recession, it’s essential to ensure the stocks you own are high-quality and can protect your capital.
That’s why Fortis is so ideal. In addition to having the ability to remain profitable no matter what the economic environment is, Fortis is also consistently investing in expanding its operations and increasing its sales.
Therefore, whether or not the economy goes into recession or begins to recover and expand from here, Fortis stock not only has years of growth potential but also has minimal downside risk, especially considering it’s already so cheap after all the interest rate increases last year.
Utility stocks are ideal investments for attractive and consistent dividend growth
Another benefit of Fortis stock consistently investing in growing its operations is that the stock is constantly seeing an increase in net income and free cash flow, which allows it to consistently increase the dividend.
In fact, Fortis has the second-longest dividend-growth streak in Canada, with a whopping 50 straight years of consistent dividend increases.
That’s one of the main reasons why it’s such a popular Canadian stock. Not only are consistent dividend increases attractive for passive-income seekers, but Fortis’s impressive track record of returning more and more capital to investors each year demonstrates what a high-quality company it is.
Furthermore, consistent and significant dividend increases will also lead to sustained growth in the share price for investors, which is why it’s not surprising at all that over the last 10 and 20 years, Fortis stock has earned investors compounded annual growth rates of 9.8% and 10.4%, respectively.
So, if you’ve been looking for high-quality stock to buy in this environment and hold for the long haul, Fortis is certainly one of the top stocks in Canada. Plus, it currently offers an appealing dividend yield of roughly 4.4%.
