If you’re an investor with a lot of patience and you like to play it safe, the energy and utility sectors are likely to have some of your most favourite businesses.
Energy and utility stocks can perform well during times of economic stability, and sustain themselves well enough during a recession. As everyone needs energy and utility services, their demand never diminishes.
We are possibly in the midst of a recession right now, so investors need to look for ways to secure their financial futures. A lot of investors might be thinking of withdrawing their investments from the stock market and reinvesting them in alternative securities. Moving forward, I will always suggest favouring safe and reliable stocks from both sectors.
The profitability of utility and energy allows energy companies to sustain decent dividend payments to shareholders. As an investor, nothing could be better than holding onto a secure stock from a company that also adds more cash to your account through dividends.
The latest weakness in crude oil prices, along with an uncertain outlook, is leading to some experts regarding stocks like Enbridge for a sell right now.
The outlook is not entirely unjustified. The company has not performed as well as it expected to in 2019, losing barely over 1% compared to last year. Crude oil is also weighing down on the company.
Short-sellers also have Enbridge in their crosshairs as well, as it’s the sixth most short-stock on the TSX, based on its value. The adverse interest around the company is based on the belief that demand for Enbridge’s services will decline. Subsequently, some investors might be thinking that the company’s earnings and share prices will also take a dip.
The demand for Enbridge remains strong. There is a shortage of pipeline transportation infrastructure to meet the demand, making Enbridge vital.
The company is responsible for the transportation of all petroleum liquids in North America as well as a fifth of its natural gas. The growth of the company is guaranteed with this in mind.
At the time of writing, ENB share prices are $47.65, and it pays a stable dividend of 6.20% to shareholders. With further projects under its belt, ENB expects profitability to improve over the long term.
Fortis is a leader when it comes to regulated gas and electric utility in North America. The company enjoys a secure position in the Canadian utility sector.
Where Enbridge established itself as one of the most reliable energy stocks on the TSX, Fortis is the strongest for the utility sector.
The stock has achieved a long history of dividend growth, which means the company is reliable and interested in rewarding its shareholders. Fortis shares have climbed 20.3% this year since the start of the year.
As investors seek more stable income alternatives, utility stocks are proving to be much better than weakening bond yields.
Fortis is aiming for dividend growth of approximately 6% by 2023. The company has a five-year plan consisting of $17.3 billion in investment to grow its rate base from $26.1 billion in 2018 to $35.5 billion by 2023.
Investors can be confident that Fortis will achieve its aim, considering the fact that it has already seen dividend growth for 45 successful years.
While the 3.54% dividend yield might not be a lot, Fortis’ robust history of rewarding its shareholders makes it an excellent stock to consider.
Enbridge and Fortis are both significant stocks within their respective industries. Investors can buy-and-hold these stocks for the long-term profits they stand to gain as well as significant income coming through the regular dividend payments.
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.