Stock market investing is an excellent way to use your money to generate significant returns. While not without its risks, the returns through investing in the right stocks can be much higher than parking your money in a high-interest savings account. You can take various approaches to investing to generate returns based on your risk tolerance and financial goals.
Ideally, you should focus on building a well-balanced portfolio that offers stability and long-term growth. The utilities sector is one of the top places investors go to for stable returns. These companies offer returns through dividend payouts and long-term capital gains.
Utility businesses offer an essential service, giving them a defensive appeal. However, not all utility companies are great at allocating capital to grow shareholder value in the long run. To successfully use investing in utility stocks to your advantage, it is better to pick the top companies.
Today, we will discuss two of the best utility stocks on the TSX that you can consider adding to your self-directed portfolio if you have $200 to invest right now.
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Fortis
Fortis (TSX:FTS) is a go-to stock for investors seeking passive income through dividend investing. Fortis is a $27.49 billion market capitalization utility holdings company. It owns and operates several natural gas and electricity utility businesses across Canada, the U.S., Latin America, and the Caribbean. It generates most of its revenue through long-term contracted assets in highly rate-regulated markets.
The company’s business model allows it to generate predictable cash flows, which it can invest in capital programs and growing shareholder dividends. Shares of Fortis stock have dragged in the last few years due to key interest rate hikes. Fortis, like many of its peers, relies on a heavy debt load. Rising interest rates have weighed on its financials.
Due to lower share prices, its dividend yield has become inflated. As of this writing, it trades for $55.79 per share, boasting a 4.23% dividend yield. Fortis is a Canadian Dividend Aristocrat that has increased its payouts to investors for over 50 years. Due to its defensive business model, it looks set to continue its streak for years to come.
Brookfield Renewable Partners
Brookfield Renewable Partners (TSX:BEP.UN) is a big player in the global renewable energy industry. The $17.58 billion market capitalization firm produces renewable energy through globally diversified assets in North America, Asia, Brazil, Colombia, Europe, and several other locations. It boasts wind, water, sunlight, and plant-based renewable energy sources, distributing the energy it produces to consumers.
The renewable energy industry has been around for a long time, but recent years have seen an increased shift toward green energy. As the climate crisis worsens, governments are trying to phase out fossil fuels for more environmentally sustainable alternatives.
Well-funded and well-established, Brookfield Renewables stock is among the top picks for investors who want to take advantage of the industry’s growth.
As of this writing, Brookfield Renewable Partners stock trades for $37.35 per share and pays its shareholders a juicy 5.08 dividend yield.
Foolish takeaway
Being a Canadian Dividend King, Fortis stock offers returns through consistently growing payouts. Due to the high-interest-rate environment dragging its share prices down, it also offers potential returns through capital gains as the economy recovers.
Brookfield Renewable Partners stock offers returns through shareholder dividends and the potential of significant long-term capital gains as the renewable industry grows in popularity.
Investing in Fortis stock and Brookfield Renewables stock can help you build strong foundations for a well-balanced, self-directed investment portfolio.
