Wow, what a week it has been. Stocks are crashing and yields rising. It has been an emotional roller coaster ride for those who choose to remain in stocks. Unlike in the recent past where you could hide in one asset class or another, pretty much everything is being smashed at the same time. Even our poor, stable dividend payers have been crushed by the market’s mad mood swings.
This should not be too much of a surprise for any investor who has been watching the news at all over the past several years. People have been forecasting the fall of dividend-paying stocks like consumer staples and utilities for quite some time. In fact, it is more mysterious that it has taken this long to fall.
The real question is whether investors should get into these beaten-down income stocks or whether they should stay away to avoid the risk of further price declines. For income investors, starting a position in some of these high-yielding companies should be very tempting. Besides the income, some of these companies also tend to do quite well in volatile times, insulating your portfolio to a degree while providing a growing stream of income.
Fortis Inc. (TSX:FTS)(NYSE:FTS) is one of these companies that you should pick up immediately to provide steady income, a relatively safe equity, and a steady growth trajectory. Originally a Nova Scotia company, Fortis operates around Canada, the United States, and even the Caribbean as a power generator and distributor. Currently, around 60% of Fortis’ earnings come from the United States. The company has around 3.3 million utility customers it serves in these regions. The focus on regional diversification has contributed to Fortis’ growth.
While it is not immune to rising rates, the stock price has fallen much less than other utilities over the course of this year. Much of this is due to Fortis’ long history of delivering financially. The company has a very steady and stable income from its businesses, with 97% of its earnings being regulated. Those earnings aren’t bad, either, with an 8% compound annual growth rate (CAGR) powering its profitability and dividend growth.
Fortis does not have the largest yields in the utility space, although it does have one of the steadiest. The yield is just over 4% at the current share price, but you can pretty much guarantee that it is going to go up.
This company has a long track record of dividend growth, with one of the longest streaks, 44 years of steady hikes, of any stock on the Toronto Stock Exchange. It has pledged to continue this trend into the future, growing the dividend by 6% a year until at least 2022.
If you want a steady company to include in your dividend portfolio, Fortis certainly checks off all of the boxes. Right now, after the recent pullback in dividend stocks, you are able to buy this company at a reasonable discount.
While this is not a GIC or bond by any stretch of the imagination, it has proven to be a relatively safe play as stock in a dividend portfolio. Take advantage of the downturn and buy Fortis as a core part of your income stream.
Iain Butler has stumbled upon a little-owned stock he believes could be one of the greatest discoveries of his almost 20 years as a professional investor.
This is your chance to get in early on of what could prove to be a very special investment recommendation. Think about how many investing trends you've missed out on, even though you knew they were going to be big. Don't let that happen again.
Fool contributor Kris Knutson owns shares of FORTIS INC.