People buy stocks for various reasons.
Some are looking for growth and capital gains; others simply want to receive a reliable stream of dividends to help supplement their pension income.
For those in the latter camp, the protection of capital and the stability of the distribution is often more important than the prospect of share-price gains.
Fortis is an electricity and natural gas utility with assets in Canada, the United States, and the Caribbean.
The company offers investors a great way to play the strong U.S. dollar, and recent investments south of the border are giving Fortis a more diversified asset base in terms of geographic and regulatory exposure.
Fortis spent US$4.5 billion in 2014 to acquire Arizona-based UNS Energy. The integration went very well and investors are already seeing the benefits. Net earnings for 2015 hit $728 million, or $2.61 per share, up from $317 million, or $1.41 per share, in 2014.
The company recently announced the acquisition of ITC Holdings Corp., a pure-play transmission business in the United States. The US$11.3 billion deal initially scared investors because the company is taking on US$4.4 billion in debt, but a deal has been reached to sell a 19.9% stake in ITC to Singapore’s sovereign wealth fund. The minority-interest sale allows Fortis to maintain its investment-grade credit rating and essentially takes care of the market’s concern.
Fortis is a favourite among dividend investors because it derives nearly all of its revenue from regulated assets. This means cash flow should be predictable and reliable.
The stock pays a quarterly dividend of $0.375 per share that yields 3.9%. The company has raised the payout every year for more than four decades and plans to hike the distribution by 6% annually through 2020.
BCE has been a top pick among income investors for years, and that trend should continue.
The company holds a dominant position in the Canadian communications market, and the addition of media assets over the past few years has really cemented its stronghold all along the value chain.
The company now owns sports franchises, radio stations, a television network, specialty channels, and retail operations. When you combine these assets with the world-class wireless and wireline networks that span the country, you get a formidable business that is set to dominate for decades.
In fact, every time a Canadian catches a Leafs game, watches the news, listens to the weather report, checks e-mail, sends a text, or downloads a movie, the odds are pretty good that BCE is involved somewhere along the line.
The stock normally holds up very well when the broader market plunges, and the 4.7% yield is one of the best among Canada’s top companies.
If you want an income stock you can simply buy and forget about, BCE is a great pick.