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Should You Buy This Dividend Growth Beast Ahead of Earnings?

Fortis (TSX:FTS)(NYSE:FTS) is a St. John’s-based company that owns and operates utility transmission and distribution assets in Canada and the United States. Shares of Fortis were up 8.7% in 2019 as of early afternoon trading on April 29. The stock has climbed 14% from the prior year.

In November 2018 I called Fortis a “must-own,” as the broader stock market was suffering from some of the worst turbulence it had seen since the financial crisis. Fortis hit an all-time high of $50.47 in April. The company recently announced that it will release its first-quarter results for 2019 on May 1.

Should you look to add Fortis ahead of its earnings release?

Fortis is one of the most sought-after dividend stocks on the TSX, and with good reason. In 2018 the company put together another solid year and reported net earnings of $2.59 per share compared to net earnings of $963 million or $2.32 per share in the prior year. The earnings bump was driven by growth in both its regulated and non-regulated businesses. Fortis also received a boost from a lower income tax expense as a result of the US Tax Cuts and Jobs Act.

The improved performance and extra flexibility allowed Fortis to increase its five-year capital expenditure plan by 20% from the prior year, which is now valued at $17.3 billion. It is forecast to grow Fortis’ rate base from $26.1 billion in 2018 to $35.5 billion in 2023. This represents a five-year compound annual growth rate (CAGR) of 6.3%.

This projection should make shareholders and prospective buyers excited. Fortis’ strategic expansion into the U.S. has been a significant success. This news may also give Hydro One shareholders a headache, but we will touch on that another time.

The growth in Fortis’ rate base allows the company to target an average annual dividend growth of 6% through 2023. Fortis last hiked its quarterly dividend to $0.45 per share. This represents a 3.6% yield. Fortis has achieved dividend growth for 45 consecutive years. Current projections mean that Fortis may be crowned a dividend king in 2023m as it will have achieved at least 50 consecutive years of dividend growth.

At this point investors know that Fortis is a top shelf dividend stock, but is it worth picking up in this hot market? Shares have marginally retreated from all-time highs, but the stock is still at the high end of its 52-week range. The stock had an RSI of 47 as of this writing, putting Fortis in neutral territory ahead of its Q1 2019 earnings release. Fortis’ P/E of 19 puts it in above average price range, which should come as no surprise, but this is still beats the industry average.

Fortis is not a screaming buy ahead of its first-quarter results, but it is one of the best long-term dividend stocks on the TSX that you can stash in your portfolio.

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Fool contributor Ambrose O'Callaghan owns shares of HYDRO ONE LIMITED.

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