As investors, it’s our ultimate goal to beat the market every year. There are many ways you can go about trying to do this, but one of the best and least-risky ways I have found is to buy stocks that meet the following criteria:

  • The company is a leader in its industry
  • Its stock is undervalued on a forward price-to-earnings basis
  • It has a high dividend yield or it pays a dividend and has an active streak of annual increases

I’ve scoured the S&P/TSX 60 Index and selected two components that meet these criteria perfectly, so let’s take a closer look at each.

1. Fortis Inc.

Fortis Inc. (TSX:FTS) is one of North America’s largest electric and gas utilities companies through its many subsidiaries, including FortisBC, UNS Energy, Central Hudson, FortisAlberta, Newfoundland Power, and Maritime Electric. Also, upon completion of its deal to acquire ITC Holdings Corp., it will become the largest independent electric transmission company in the United States.

At today’s levels, its stock trades at just 18.8 times fiscal 2016’s estimated earnings per share of $2.15 and only 16.4 times fiscal 2017’s estimated earnings per share of $2.46, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 20.2 and its industry average multiple of 44.1. These multiples are also inexpensive given the company’s estimated 12% long-term earnings growth rate.

Additionally, Fortis pays a quarterly dividend of $0.375 per share, or $1.50 per share annually, which gives its stock a yield of about 3.7%.

It’s also important to make two notes regarding its dividend.

First, Fortis has raised its annual dividend payment for 43 consecutive years, tying it with one other company for the longest active streak for a public corporation in Canada, and its 10.3% hike in September has it on pace for 2016 to mark the 44th consecutive year with an increase.

Second, it has a dividend-per-common-share growth target of 6% annually through 2020, and I think it’s safe to assume that it will extend this target or announce a new one as 2020 nears.

2. Thomson Reuters Corp.

Thomson Reuters Corp. (TSX:TRI)(NYSE:TRI) is the world’s leading source of intelligent information for businesses and professionals, which it describes as “a unique synthesis of human intelligence, industry expertise, and innovative technology.”

At today’s levels, its stock trades at just 20.1 times fiscal 2016’s estimated earnings per share of US$2.04 and only 17.6 times fiscal 2017’s estimated earnings per share of US$2.33, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 41.5 and its industry average multiple of 28.2. These multiples are also inexpensive given the company’s estimated 10.6% long-term earnings growth rate.

Additionally, Thomson Reuters pays a quarterly dividend of US$0.34 per share, or US$1.36 per share annually, which gives its stock a yield of about 3.3%.

It’s also important to make two notes regarding its dividend.

First, Thomson Reuters has raised its annual dividend payment for 22 consecutive years, tying it with one other company for the fourth-longest active streak for a public corporation in Canada, and its 1.5% hike in February has it on pace for fiscal 2016 to mark the 23rd consecutive year with an increase.

Second, it has a target dividend-payout range of 40-50% of its annual free cash flow, so I think its consistent growth, including its 24.6% year-over-year increase to US$1.8 billion in fiscal 2015, will allow its streak of annual dividend increases to continue long into the future.

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Fool contributor Joseph Solitro has no position in any stocks mentioned.