By Rajiv Nanjapla at The Motley Fool Canada
Yesterday, the Canadian benchmark index, the S&P/TSX Composite Index, gained 1.24% amid growing optimism that the United States and Iran could reach an agreement to end the ongoing conflict. Following yesterday’s rally, the index is now up 7.15% year to date and trades just 1.63% below its all-time high. However, uncertainty surrounding the details of any potential agreement and its eventual outcome continues to weigh on investor sentiment.
Against this uncertain backdrop, investors should consider adding high-quality dividend stocks with strong fundamentals, healthy cash flows, and reliable payout histories to help stabilize their portfolios while generating steady passive income. Beyond providing regular income, dividend stocks can also support long-term wealth creation by reinvesting their consistent payouts and benefiting from compounding.
With that in mind, let’s examine Fortis (TSX:FTS) by evaluating its business outlook, recent financial performance, growth prospects, dividend track record, and yield to determine whether the stock presents an attractive buying opportunity today.
Fortis’s business outlook
Fortis operates a regulated utility business serving approximately 3.5 million customers across the United States, Canada, and the Caribbean through its electric and natural gas distribution networks. With a highly regulated asset base and nearly 95% of its assets tied to low-risk transmission and distribution operations, the company enjoys stable, predictable financial performance largely insulated from economic cycles and market volatility. In addition, the steady expansion of its rate base has consistently supported earnings growth and long-term share price appreciation.
Over the last two decades, Fortis has delivered an average annual total shareholder return of 10.46%. The company has also increased its dividend for 52 consecutive years and currently offers a forward dividend yield of 3.34%, highlighting the reliability of its payout profile.
Meanwhile, Fortis reported its first-quarter results yesterday. During the quarter, the utility deployed $1.4 billion in capital investments and remains on track to place $5.6 billion of capital into service this year. Its net earnings were $501 million, while earnings per share (EPS) were $0.99, slightly below the $1.00 reported in the same quarter last year. Earnings benefited from continued rate-base expansion and favourable earnings timing at Central Hudson. However, weaker wholesale market conditions, higher maintenance expenses, costs associated with rate base growth not yet reflected in customer rates, and a higher weighted-average share count weighed on the company’s EPS.
Now, let’s examine Fortis’s long-term growth prospects.
Fortis’s growth prospects
Driven by economic growth, the electrification of the transportation sector, and the rapid expansion of AI-ready data centers, electricity demand is increasing, creating strong long-term growth opportunities for Fortis. Supported by this favourable backdrop, the utility is steadily expanding its rate base through its $28.8 billion capital investment program, which is expected to grow at a 7% compound annual rate to reach $57.9 billion by the end of 2030.
These investments should support steady earnings and cash flow growth in the coming years. Backed by its visible growth pipeline and a resilient, regulated business model, management expects to increase the company’s dividend by 4%–6% annually through 2030, underscoring the strength and reliability of its long-term growth outlook.
Investors’ takeaway
Year to date, Fortis has delivered a total shareholder return of 8.3%, outperforming the broader equity markets. Despite this solid performance, the stock continues to trade at attractive forward valuation multiples, with a price-to-sales ratio of three and a forward price-to-earnings ratio of 20.6.
Considering its resilient regulated business model, visible long-term growth prospects, and exceptional dividend track record, I believe Fortis remains a reliable stock for investors looking to deploy $20,000 to generate stable long-term returns and passive income.
The post A Reliable Dividend Stock Worth Putting $20,000 Behind Right Now appeared first on The Motley Fool Canada.
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Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.
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