Stock Up Sale
Canadian investors are navigating investment options for a potentially explosive 2025. As the economy braces for a potential shock as the United States’s president-elect threatens to impose huge tariffs on trade partners, finding stocks that offer growth, reliable passive income, and wealth preservation has become increasingly crucial. Enter Fortis Inc. (TSX:FTS), a rare stock investment option that checks most boxes for long-term-oriented investors.
While high-flying tech stocks grab headlines, Fortis – an electric and gas utility stock serving millions of customers in Canada, the United States and Caribbean territories – has quietly built a 51-year track record of consecutive dividend increases, recently becoming only the second Canadian company to achieve the coveted Dividend King status (behind Canadian Utilities (TSX:CU) stock). Its fresh 4.2% dividend raise in November brings the current yield to 4.1%, but here’s what makes Fortis stock truly compelling for 2025:
- Historical data shows that investors who bought Fortis a decade ago and reinvested their dividends have more than doubled their money, with remarkably low volatility.
For investors seeking the trifecta of steady income, capital preservation, and long-term growth potential, Fortis stock’s story is more than about the 4.1% future dividend yield.
It demands more attention.
A $26 billion growth plan powers Fortis stock’s future
Fortis stock isn’t just about current income – it’s positioned for significant growth. The company’s newly announced 2025–2029 capital expenditure plan of $26 billion represents its most ambitious (and low-risk) expansion yet. This comprehensive revenue and earnings growth plan, which exceeds the previous five-year strategy by $1 billion, aims to grow the company’s rate base from $38.8 billion to approximately $53 billion by 2029, targeting a robust 6.5% annual growth rate.
Revenue growth could translate into earnings, cash flow, and respectable dividend growth rates.
How Fortis stock could double your money
For investors seeking wealth accumulation, Fortis stock presents a compelling case. Using the predictive power of the Rule of 72, doubling your investment over a decade requires roughly 7.2% in annual total returns. Fortis stock’s current 4.1% dividend yield, combined with management’s targeted dividend growth rate of 4-6% through 2029, means investors need only modest share price appreciation to achieve this goal.
- A 4% annual dividend growth rate through 2029 could increase your yield (on cost) to 5% by 2030
- A 6% annual dividend growth rate would grow the yield to 5.5% over the next five years.
- Thus, investors would require much less capital gains to double their investment within the next decade!
Historical performance supports this potential – investors who purchased Fortis stock a decade ago and reinvested all dividends saw their position grow by 125%.
Buy Fortis stock for stability in uncertain times
What makes Fortis stock particularly valuable is its remarkable stability. With a one-year Beta of just 0.09 against the S&P 500, Fortis stock has shown exceptionally low volatility compared to the broader market. As a regulated electric and gas utility serving millions of needy customers, Fortis provides essential services that generally remain in demand regardless of economic conditions.
The growing energy demands of artificial intelligence (AI) and technological advancement provide additional tailwinds for Fortis stock’s growth trajectory.
Interestingly, Fortis stock could help diversify volatile AI-tilted portfolios.
Fortis stock’s attractive valuation and low-risk growth funding
Currently trading at a forward price-to-earnings (P/E) multiple of 17.8, Fortis stock sits comfortably within its five-year historical PE range. This reasonable valuation, paired with the company’s proven track record of shareholder wealth creation, creates an appealing entry point for long-term investors.
The company’s plans to fund its $26 billion capital expenditure primarily through internally generated cash flow, reduces the risk of excessive debt or equity dilution. Fortis’s dividend reinvestment plan (DRIP) provides an additional source of capital for future projects, and allows current investors to participate in its growth projects for even more dividends and capital gains.
Fortis stock appears to be a well-positioned core-portfolio investment for 2025 and beyond.
Investor takeaway
For investors seeking a combination of current income, growth potential, and stability, Fortis stands out as a compelling choice. Its status as a dividend king, coupled with its robust growth plans and an essential business model, makes it a strong candidate for any growth and income-focused portfolios heading into 2025.
