Fortis Inc. Offers a Solid 4% Yield

Fortis Inc. (TSX:FTS) pays consistent income. It yields 4% today and aims to increase the yield 6% per year. Should you buy it today?

| More on:
The Motley Fool

If you’re looking for consistent dividends, you’ve come to the right place. Utilities typically pay stable dividends. This utility in particular has grown its dividend for over 40 years, and it looks like it’ll continue to hike it.

Fortis Inc. (TSX:FTS) is a leading North American utility. It’s primarily regulated; 96% of its assets are regulated (70% electric and 26% gas).

Being a regulated utility means that its returns are capped, but stable. So, Fortis adds stability to any portfolio.

Low-risk business

Fortis’s regulated assets are diversified across multiple jurisdictions, further reducing risk. Fortis doesn’t own more than one-third of assets in any jurisdiction.

Its UNS Energy assets, which make up 32% of assets, are in Arizona. FortisBC, which makes up 30% of assets, is in British Columbia. FortisAlberta, which makes up 14%, is in Alberta. Central Hudson, which makes up 11%, is in the New York state.

Accomplishments of the past year

In the past year, Fortis has successfully integrated UNS Energy, which is accretive to earnings per share. Fortis also completed the Waneta Expansion Project, a two-unit 335-megawatt hydroelectric power plant, which is the largest capital project in Fortis’s history.

Fortis sold its non-core real estate portfolios of commercial and hotel properties for $795 million in total. Further, it sold non-core hydroelectric-generating assets for $93 million.

Just this month, Fortis entered an agreement to acquire gas infrastructures in British Columbia for roughly US$266 million. Specifically, Fortis is acquiring Chevron Canada Properties Ltd.’s share of the Aitken Creek Gas Storage Facility.

This facility is the only underground gas storage facility in BC that offers storage to third parties. Additionally, the facility is an integral part of western Canada’s natural gas transmission network, which would benefit Fortis as proposed LNG export projects are completed.


As Fortis is investing and growing, it continues to reward shareholders in the form of dividend growth. In fact, Fortis has increased its dividend for 42 consecutive years. It even increased the dividend two times this year.

As a result, its quarterly dividend of 37.5 cents is 17.2% higher than a year before. Going forward through 2020, Fortis targets a dividend-growth rate of 6% per year.


Fortis offers income consistency. It also has a strong financial profile. S&P has awarded it with a credit rating of A-, and Fortis’s debt-to-cap ratio is 50%. If you’re looking for a decent yield of 4% that grows 6% per year, you should consider Fortis.

The only downside, if you ask me, is that the shares are fully valued at about $38. Investors should decide whether or not they’re willing to pay a full price for a high-quality business with a stable dividend. Alternatively, you can wait for a price dip to, say, about $36 before buying.

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 of FORTIS INC.

More on Dividend Stocks

Canadian Dollars
Dividend Stocks

Buy 734 Shares of This Top Dividend Stock for $9,574 a Year in Passive Income

Are you looking to earn regular income? Now is an opportune time to buy Dividend Aristocrats at discounts and accelerate…

Read more »

A plant grows from coins.
Dividend Stocks

This Ultra-High Yield Stock Just Hit a 52-Week Low, and it’s Still a Buy Today

Enbridge Inc (TSX:ENB) stock recently hit a 52-week low. Here's why.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 6% Dividend Stock Pays Cash Every Month

Are you looking to earn cash every month from October 15 onwards? This 6% dividend stock gives you monthly payouts.

Read more »

Person slides down a stair handrail
Dividend Stocks

With a 7.6% Dividend, This TSX Stock Is One to Buy Now and Hold for Decades

Now is an opportune time to invest in this no-brainer TSX stock and get +$30 extra dividend for decades on…

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

CPP Benefits Will Be Higher for Millennials and Gen Z

Older Canadians won't get enhanced CPP, but they may invest in dividend stocks like Royal Bank of Canada (TSX:RY).

Read more »

A plant grows from coins.
Dividend Stocks

The Best Dividend Stocks in Canada Right Now

Seeking to give a boost to your income portfolio, consider investing in these best Canadian dividend stocks.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Retirees: Want Fast-Growing Passive Income? Here Are 3 Long-Term Dividend Stocks

Are you looking for dividend stocks that can grow their distributions very quickly? Here are three long-term picks!

Read more »

dividends grow over time
Dividend Stocks

2 Top Dividend Stocks You Can Buy and Hold Forever

The market is full of great dividend stocks, but not all are long-term gems. Here are two options that you…

Read more »