2 Dividend-Growth Stocks for Conservative Investors

Fortis Inc. (TSX:FTS) and Metro Inc. (TSX:MRU) might be boring, but the returns they generate certainly aren’t.

| More on:
The Motley Fool

We all want consistent returns from our income stocks, but not everyone can stomach the risk that comes with some of the more popular names.

Here’s why I think Fortis Inc. (TSX:FTS) and Metro Inc. (TSX:MRU) are solid picks that won’t keep you up all night.


The power generation business sounds pretty boring, but that’s exactly why Fortis is a great pick for conservative investors. The company is not just the largest investor-owned distribution utility in Canada; it also owns assets the United States and the Caribbean.

Fortis churns out consistent and reliable cash flow every year and has a fantastic track record of dividend growth.

Now, the future looks even brighter. Last year, Fortis spent $4.5 billion to acquire Arizona-based UNS Energy. The deal will add significant cash flow in 2015 and investors should see strong revenue and dividend growth as UNS gets integrated into the company.

Fortis also has a large hydroelectric expansion coming to completion in B.C., which should add more than $20 million to earnings in 2015.

Regulated utilities represent 93% of the company’s assets, which means the company has predictable revenue streams coming from most of its operations.

Fortis pays a dividend of $1.36 per share that yields about 3.5%. Shareholders have also enjoyed a 40% gain in the stock price in the past five years.


If you live in Ontario or Quebec, you have probably spent some money at one of Metro’s retail locations. The company operates 800 grocery stores and 250 drug stores located in the two provinces.

Many investors think the food industry should be avoided because competition is just too heavy for businesses to consistently make money. That is absolutely not the case, especially with Metro. The company runs a very efficient operation and continues to grow earnings at an impressive rate.

In Q1 2015 Metro reported net earnings of $1.30 per share, a 23% increase over the same period in 2014.

For conservative investors, the business is attractive because it is pretty much recession-proof. People have to eat, and drug stores are always going to be busy.

The stock also offers a nice combination of dividend growth and capital appreciation. In fact, Metro hiked its quarterly dividend by 20% last summer to $0.30 per share and just increased it again to $0.35. The stock recently completed a 3-for-1 split and has surged nearly 170% in the past five years. The shares certainly aren’t cheap right now, but the growth rate is strong enough that investors should see more gains in both the shares and the dividend payout.

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 Andrew Walker has no position in any stocks mentioned.

More on Dividend Stocks

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth

Here's how investors can turn small initial RRSP contributions into substantial savings for retirement.

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 BMO ETFs Are Less Volatile Than BMO Stock

Two ETFs of a big bank are more suitable for risk-averse or ultra-conservative investors than its stock.

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Cheap Dividend Stock to Buy as Recession Fears Rise

Great-West Lifeco (TSX:GWO) is an undervalued financial stock that looks like a great buy, even as the world economy tumbles…

Read more »

Profit dial turned up to maximum
Dividend Stocks

2 TSX Stocks Paying Over 5% in Dividends

Add these two blue-chip dividend stocks to your portfolio for wealth growth through shareholder dividends and capital gains.

Read more »

Business people standing near houses models
Dividend Stocks

2 REITs to Own as Rental Housing Demand Rise

Two prominent residential REITs should be on your buy list, as the rental housing market picks up due to rising…

Read more »

Retirement plan
Dividend Stocks

FIRE Movement: How to Retire Early Using Your TFSA

You can increase your financial independence and even retire early by investing in solid dividend stocks in your TFSA over…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: 2 Stocks to Buy Now for a Personal Pension Fund

RRSP investors can find top TSX dividend stocks at cheap prices today.

Read more »

Cogs turning against each other
Dividend Stocks

1 Passive-Income Stock to Counter Volatility

Looking for a stock that can counter volatility now and tomorrow? This stock is a reliable option for growth and…

Read more »