Are These 3 Utilities the Safest Growing Dividends in Canada?

Looking for safe income to maintain your purchasing power? Consider Fortis Inc. (TSX:FTS), Canadian Utilities Limited (TSX:CU), and Atco Ltd. (TSX:ACO.X).

| More on:
The Motley Fool

Utilities are among the safest companies to invest in because they provide a service that fills a need and not a want. It doesn’t come as a surprise that out of the top five Canadian companies that have paid the longest streak of growing dividends, three of them are utilities. These utilities have all paid a growing dividend for more than 20 years.

1. Fortis Inc.
First, we have Fortis Inc. (TSX:FTS). Fortis is Canada’s biggest regulated utility with more than 3 million retail natural gas and electricity customers. A small percentage of its assets are in non-regulated hydroelectric generation assets in Canada, Belize, and upstate New York. On top of that, Fortis also invests in hotels and commercial real estate in Canada.

Fortis has raised its dividends for 41 consecutive years, taking the number one spot for paying the longest streak of growing dividends in Canada. At around $39 per share, it yields close to 3.5%. It pays out a dividend every quarter.

The dividend was just increased 6.3% in the first quarter of 2015. As impressive as Fortis’ record sounds, its payout ratio is currently over 92%, which is a concern as it is the highest it has ever been.

2. Canadian Utilities Limited
Second, we have Canadian Utilities Limited (TSX:CU). It is a diversified utility with assets in electric and gas distribution and energy infrastructure. Of its revenue, 75% comes from regulated utilities, while 20% comes from its energy business.

Canadian Utilities has raised its dividends for 32 consecutive years. At around $40 per share, it yields close to 3%, and it pays a dividend every three months.

In the first quarter of 2015, Canadian Utilities Limited increased its dividend by 10.3%. It now has a payout ratio of 43%. Since this ratio is consistent with its recent payout ratios, I expect it to continue raising its dividend between 7-10%, in line with its earnings growth, and perhaps expanding the payout ratio slightly.

3. Atco Ltd.
Third, we have Atco Ltd. (TSX:ACO.X). It owns about 53% of Canadian Utilities Limited. In addtion, Atco has a division focused on Structures and Logistics, providing modular structures to the global resources industry. Further, it operates and maintains facilities for the defence industry.

Atco Ltd has raised its dividends for 21 consecutive years. Currently, it costs roughly $45 per share, yielding close to 2.2%. It pays a quarterly dividend.

It increased its dividends 15.1% in the first quarter of 2015, resulting in a payout ratio of 24%. This is a lower ratio compared to the other two utilities and may indicate higher dividend growth capabilities.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares in Canadian Utilities.

More on Dividend Stocks

financial freedom sign
Dividend Stocks

Generate Enough Passive Income to Retire

Looking to generate a stream of passive income to retire on? Here are several stocks to start building out your…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Stocks to Hold for a Reliable Source of Passive Income

Are you looking for a way to produce a reliable source of passive income? Hold these three stocks!

Read more »

worry concern
Dividend Stocks

3 Stocks to Buy if You Are Worried About a Recession

There are a lot of safe investments that can help your portfolio remain afloat during a recession and the market…

Read more »

Two colleagues working on new global financial strategy plan using tablet and laptop.
Dividend Stocks

2 Canadian Dividend Stocks I Just Bought During the Selloff 

There are plenty of high-quality investments to consider today, but these two Canadian dividend stocks are easily among the best.

Read more »

Dividend Stocks

Top 3 Utility Stocks for Stability and Consistent Income

These utility stocks could continue to return cash, irrespective of the volatility in the market.

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Tradeoff: Lower Home Prices for Higher Debt Burden

Buyers welcome lower home prices but more rate hikes will increase their financial burdens.

Read more »

Dividend Stocks

1 Top REIT to Buy Amid Housing Price Cooldown

Consider investing in this Canadian REIT if you want to capitalize on the housing price cooldown right now.

Read more »

stock analysis
Dividend Stocks

TFSA Passive Income: 2 Oversold Dividend Stocks for Self-Directed Investors

These top TSX dividend stocks look cheap right now.

Read more »