Dividend investors have been hit hard over the past 12 months as many of the previous top picks have slashed payouts or even cancelled them completely.
Most of the carnage has been in the commodity space, which represents a large part of the Canadian market, and that means income seekers have to look elsewhere for reliable yield.
Fortis owns electricity generation and natural gas distribution assets in Canada, the Caribbean, and the United States.
About 93% of the company’s revenue is derived from assets that operate in regulated environments. That’s good for income investors because it means cash flow and earnings should be very reliable.
Management continues to add new facilities to the portfolio.
Last year Fortis purchased Arizona-based UNS Energy for $4 billion. The acquisition gives Fortis a broader U.S. footprint and is already accretive to earnings. This year, Fortis completed work on its hydroelectric facility in British Columbia. That project is now putting money in the pockets of investors.
Fortis pays a quarterly dividend of $0.375 per share that yields about 3.9%. The dividend has increased every year for more than four decades.
BCE has long been a favourite among retirees, and there is good reason for that situation to continue.
The company has evolved with the changing times and is embracing new technology, while making a strategic push into all segments of the media and communications value chain.
Through a series of carefully planned investments, BCE has amassed an impressive portfolio of sports franchises, radio stations, retail outlets, Internet properties, a TV network, and specialty channels.
When combined with BCE’s world-class mobile and wireline network infrastructure, you get a media and communications giant with a well-entrenched leadership position in a market that has little real competition.
Consumers might not be comfortable with that situation, but investors love it.
The company continues to spend on its network infrastructure, with $20 billion allocated over the next five years.
That’s sounds like a lot of money, and it is, but the company is a cash machine. Year-over-year free cash flow for the second quarter increased 8%.
BCE pays a quarterly dividend of $0.65 per share that yields about 4.6%. The payout is already quite generous, but investors should see the distribution continue to rise in step with free cash flow growth.