Canadian investors are wondering where to put their money with markets trading at lofty levels and geopolitical risks increasing around the world.
Let’s take a look at Fortis Inc. (TSX:FTS)(NYSE:FTS) and BCE Inc. (TSX:BCE)(NYSE:BCE) to see why they might be interesting picks.
Fortis
Fortis owns power generation, electric transmission, and natural gas distribution assets in Canada, the Caribbean, and the United States.
Most of the investments in recent years have been focused on the United States, and with the American dollar gaining strength against its Canadian counterpart, investors are benefiting from U.S.-based earnings.
The company bought Michigan-based ITS Holdings Corp. last year for US$11.3 billion and added Arizona-based UNS Energy in 2014.
As a result of the revenue boost coming from these businesses and other organic developments, Fortis expects to see cash flow rise enough to support annual dividend growth of at least 6% per year through 2021.
The company has raised its payout every year for more than four decades, so investors should feel comfortable with the guidance.
The current distribution provides a yield of 3.6%.
BCE
BCE recently closed its $3.9 billion acquisition of Manitoba Telecom Services in a deal that launches BCE into the top spot in the Manitoba market and provides the company with a powerful base in central Canada.
The communications giant just reported strong Q1 2017 results with impressive subscriber additions across the wireless, internet, and TV segments.
Revenue growth for the year was upgraded to 4-6% with expected EBITDA growth to be in the same range.
Free cash flow for the quarter rose 17% compared to Q1 2016, and the company expects the metric to increase 5-10% in 2017.
BCE’s annualized dividend of $2.87 per share provides a yield of 4.6%.
Is one more attractive?
Both stocks tend to hold up well when the broader market hits a speed bump. At this point, I’d say it is pretty much a coin toss between the two names.
If you want exposure to the U.S., go with Fortis. If you are simply after the highest yield, BCE remains an attractive pick.
The best decision might be to add a bit of both to your buy-and-hold dividend portfolio.
