Why Investors Should Buy This Top TSX Stock Today

Here’s why I think Fortis Inc. (TSX:FTS)(NYSE:FTS) is a top TSX pick investors should buy right now.

The utilities sector is one which has been undervalued for some time. Indeed, growth stocks have taken off, and other sectors have lagged behind. Investors seeking total returns have largely moved away from high-yielding sectors in favour of growth sectors.

That said, I’m going to discuss why the utilities sector is one which carries a lot of value right now. In particular, I’m going to talk about why I think Fortis (TSX: FTS)(NYSE: FTS) is among the best names in utilities today.

Growth likely to impress long-term investors

Those bent on finding short-term, quick wins won’t like utilities. Indeed, companies like Fortis don’t move in a parabolic way in the short term. Rather, these companies tend to provide long-term investors with a slow-and-steady upward grind in the mid- to high single digits every year.

I think the companies that will come out ahead in the utilities space are those that can maintain growth while managing their budgets and growing cash flows. Fortis fits this description perfectly. Indeed, Fortis has continued to provide some of the best-in-class growth in past decades relative to its peers. I expect Fortis to continue to grow its earnings in the mid to high-single digit range long term.

Fortis has one of the best management teams in the sector and has a proven ability to do generate this kind of growth. Accordingly, I think long-term investors should look at Fortis as a core utilities holding right now.

Yields have never been this attractive

Investors need to keep in mind that the bond and equity markets work together. Yes, these are two completely different asset classes. However, bond yields being so low should have an outsized effect on high-yielding equities like Fortis. To date, we haven’t seen this materialize. Thus, I think a tremendous amount of potential exists for upward revaluation once the market comes to its senses.

In Fortis’s case, investors need to keep in mind the dividend-growth prowess of this company. Fortis hasn’t missed an annual dividend hike in nearly five decades. (That’s decades, not years!). This is a dividend-growth machine. Accordingly, those with growing income needs in retirement can’t go wrong owning Fortis for the next few decades.

Additionally, I think we’re in the midst of a growth to value rotation in stocks. Companies like Fortis that provide excellent value and defensiveness have not been bid up as they should have in this low interest rate environment. As more capital flows out of high-growth stocks into slower-growth, long-term stocks like Fortis, I think these companies will do very well.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

More on Dividend Stocks

ETFs can contain investments such as stocks
Dividend Stocks

How to Use a TFSA to Generate $200 in Monthly Tax-Free Income

Use a TFSA to build $200 in monthly tax-free income with XEI and ZRE. See how these ETFs work and…

Read more »

Business success of growth metaverse finance and investment profit graph concept or development analysis progress chart on financial market achievement strategy background with increase hand diagram
Dividend Stocks

Smart Ways to Invest Extra Income and Say Goodbye to Financial Stress

Canadians have ways to make their extra income work as hard as they do and say goodbye to financial stress.

Read more »

Two seniors walk in the forest
Dividend Stocks

Sun Life Stock Pays 3.3%: How Much to Invest for $100 a Month in Dividends

Sun Life Financial (TSX:SLF) might be a massive bargain after Thursday's vicious plunge as stock markets sold off hard.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn Your TFSA Into $1,000 a Month in Tax-Free Income

Build toward $1,000 a month in tax-free income with a TFSA. See how Enbridge, Scotiabank and ZWC could help, and…

Read more »

customer fills up car with gasoline
Dividend Stocks

How Much Emergency Money Do Canadians Actually Need?

A safety fund equivalent to 3 to 6 months of living expenses is generally the baseline buffer that Canadians would…

Read more »

woman holding steering wheel is nervous about the future
Dividend Stocks

Still Up Double Digits This Year: Should You Still Invest in TSX Stocks After Thursday’s Dramatic Drop?

The TSX has gained about 136% over the past decade. So, stay invested, dollar‑cost average, and maintain diversification. 

Read more »

Real estate investment concept
Dividend Stocks

Intact Stock: Would I Buy It for Growth, Income, or Both?

Intact’s modest yield makes profitable long-term growth the main attraction, with catastrophe losses putting the next purchase to a test.

Read more »

hiker with backpack in the mountains
Dividend Stocks

2 Top Canadian Dividend Stocks for $1,850 in Annual Passive Income

With reliable cash flows, high dividend yields, and strong growth prospects, these two Canadian stocks suit income-seeking investors.

Read more »