Protect Your Portfolio in 2020 With This Top Dividend Stock

Fortis Inc. (TSX:FTS) (NYSE:FTS) offers investors security and stability plus a 3.4% dividend yield; fine qualities that will protect your money in a down market.

| More on:
Canadian Dollars

Image source: Getty Images

If you are one of those investors who is predicting a recession, I have the stock for you. Many market watchers and experts are also calling for difficult times ahead, but with the wide range of forecasts for the markets, what is also clear is that this volatile market is difficult to call.

One thing at least is certain: given all the risks out there and the fact that markets have been going strong for a decade now, the downside risk is high.

I am therefore recommending that investors increase their exposure to high quality, stable stocks in order to protect themselves from the seemingly inevitable fall. Protecting your portfolio in this way is a good strategy, as missing out on some further upside is a small price to pay for preserving your capital and minimizing your losses.

Fortis: A top dividend stock for the ages

With Fortis Inc. (TSX:FTS)(NYSE:FTS), investors have been able to count on long-term, profitable growth for many decades. This has been Fortis’ specialty, and with all signs pointing to continued success, this stock is a great addition today.

This investment grade company has $52 billion in assets serving customers in Canada, the U.S., and the Caribbean, rendering it a North American leader in the regulated gas and electric utility industry.

With 99% of its earnings currently coming from regulated and/or long-term contracted utility infrastructure, it’s easy to see why this stock is a stable, defensive one with a strong history of predictable earnings and dividend growth.

Counting on dividend growth well into the future

As I have mentioned, a very special feature of Fortis is its history of exceptional dividend growth. In fact, Fortis has 46 years of dividend growth under its belt, making it a top dividend stock today. Looking ahead, with the company’s stated annual dividend growth target of 6% being extended through 2024, we can continue to feel confident that this track record will continue.

Investing in the future

Not only does Fortis have its strong base of quality gas and electric assets, but the company also has strong growth opportunities that are being driven by regulated investments in grid modernization, clean energy, and the emergence of LNG infrastructure.

At FortisBC, for example, after the liquefaction plant got its first term contract to send Canadian LNG to China, it seems certain that further expansion will be required to meet increased demand in the emerging Canadian LNG industry.

Given these big growth opportunities, Fortis has stepped up its five-year capital plan, effectively increasing it by $1 billion to $18.3 billion. Growth will come organically, a lower risk way to grow that minimizes tapping into the debt and equity markets as compared to growth through acquisitions.

Fortis is dedicated to maintain a strong balance sheet, and we can expect to see further improvements in the coming five years, driven by continued strong cash flow generation and a strong funding outlook.

Foolish final thoughts

Even after the strong rally in Fortis stock, it still represents a very attractive pick for investors looking to protect their portfolio in 2020. Fortis is a defensive stock with a lot going for it.

While Fortis’ dividend yield has come down due to stock price appreciation and now stands at 3.41%, (and valuation is not cheap), Fortis remains a top pick for investors. This stock as a great buy for the aforementioned reasons.

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 Karen Thomas has no position in any of the stocks mentioned.

More on Investing