Recent weakness in the market is finally giving dividend-growth investors a chance to pick up some of Canada’s most reliable names for very attractive prices.
Here are the reasons why I think Fortis Inc. (TSX:FTS), BCE Inc. (TSX:BCE)(NYSE:BCE) and Potash Corp./Sasktchewan Inc. (TSX:POT)(NYSE:POT) are solid picks right now.
Fortis Inc.
Fortis Inc. has increased its dividend every year for the past four decades and that trend looks set to continue.
As one of North America’s top electric and gas utility companies, Fortis operates nearly $28 billion in energy assets located across Canada, the U.S., and even the Caribbean.
Dividend investors like the company because 93% of its revenue is sourced from regulated assets. This means cash flow is both predictable and reliable.
Management continues to make strategic investments. Last year, Fortis spent US$4.3 billion to acquire Arizona-based UNS Energy. The purchase gives Fortis a more balanced footprint in the U.S. and is already accretive to earnings.
The company is also willing to divest assets when the market is willing to pay a healthy premium. Fortis recently sold its commercial real estate portfolio for $430 million. The firm now has a huge cash reserve that can be used for another utility acquisition or even a special dividend for shareholders.
The stock has pulled back nearly 15% since the beginning of February, giving long-term investors a chance to get in at a reasonable price.
Fortis pays a dividend of $1.36 per share that yields about 3.8%.
BCE Inc.
Canada’s largest media and communications company has built itself an impressive portfolio of assets that runs the full length of the media and communications value chain.
Every time a Canadian watches TV, uses the Internet, sends a text message, listens to the radio, or buys a new smartphone, odds are BCE is benefitting in one form or another.
BCE pays a dividend of $2.60 per share that yields about 4.9%. Investors can buy this stock and simply sit back and watch the free cash flow pour in for years to come.
Potash Corp./Saskatchewan Inc.
Over the next 35 years the number of people living on this planet is expected to rise from 7 billion to as much as 11 billion.
In the next 15 years alone, the annual consumption of grain and oil seeds is expected to increase by 1.6 billion tonnes. To meet this demand, farmers will need to use an additional 58 million tonnes of potash, nitrogen, and phosphate.
Potash Corp. is wrapping up a series of multibillion-dollar expansion projects at a time when global potash demand is at record levels. This is good news for investors because the cash flow available for distributions should increase as these projects shift from development to production.
Potash Corp. recently increased its dividend by 9% to US$1.52 per share. With the recent pullback in the stock, the dividend now gives investors a juicy 4.9% return.
