Why Fortis Stock Remains a Top Buy Today for Long-term Investors

Here’s why Fortis (TSX:FTS)(NYSE:FTS) remains a top “forever” pick long-term investors should consider adding right now.

| More on:
Where to Invest?

Image source: Getty Images

In this current market, not every dividend-paying stock is a good pick. Rising bond yields are diminishing the value dividend-paying stocks can provide.

Accordingly, investors will want to focus on long-term income holdings with growth potential. Specifically, companies that raise their dividends over time and provide capital appreciation.

In this context, I believe Fortis Inc. (TSX:FTS)(NYSE:FTS) is one of the best income stocks today. Here’s why Fortis remains one of my top picks.

Dividend growth key to Fortis’ ownership thesis

As far as dividend growth is concerned, few companies have been as consistent as Fortis. The company’s raised its dividend each and every year for nearly five decades. That kind of track record is truly unparalleled today.

How has Fortis done this?

Well, Fortis has a business model which provides about as stable a growth trajectory as any investor could want. The company’s regulated gas and electric utility contracts provide extremely predictable and stable cash flows. The company’s dividend growth rate reflects the growth of its cash flows over time, which are generally pre-set and are, for all intents and purposes, about as “guaranteed” as investors can get in any business.

Fortis’ forward dividend yield of 3.7% may not scream “high yield.” However, it’s the dividend growth rate I’d invite investors to consider with this stock. The company’s raised its dividend at an average rate of more than 6% a year for the past five years. I expect mid- to high single-digit dividend increases to continue for the foreseeable future.

Bottom line

Fortis’ value proposition is one that’s easy to understand. It’s about as defensive a play as investors could want. And for those nearing or in retirement, the increased income provided by this stock is something to be pursued.

I’m of the belief that we’re going to continue to see a rotation toward stocks like Fortis for some time. The market is broadly overvalued, and Fortis provides total return potential that’s reasonable. I think when investors do shift their focus to finding reasonable, predictable returns rather than speculative short-term moves, Fortis is a stock that will perform really well.

Accordingly, investors need to be patient with this stock. It’s a core holding that can be added to over time on weakness. Additionally, it’s priced relatively attractively right now.

Indeed, there are few stocks I’d recommend so vehemently right now. Fortis happens to be one of the select few “forever” holdings I’d recommend on the TSX right now.

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

More on Dividend Stocks

Target. Stand out from the crowd
Dividend Stocks

3 Oversold Stocks to Buy for Passive Income

These three oversold stocks aren't just great right now for high passive income, but provide exposure to high-growth industries.

Read more »

money cash dividends
Dividend Stocks

TFSA Passive Income: Invest $30,000 to Earn $500,000 + $7,800 in Tax-Free Dividends

Make the power of compounding work for you and turn a $30,000 investment into $500,000 in the next 20 years.

Read more »

Wireless technology
Dividend Stocks

5 Things to Know About Telus (TSX:T) Stock

Telus offers a diversified business model and steady dividend growth. Is it a buy in this market?

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

These 2 Canadian Dividend Stocks Are a Retiree’s Best Friend

Retirees can expect these companies to pay uninterrupted dividends and grow their payouts in the coming years.

Read more »

A stock price graph showing declines
Dividend Stocks

Here’s Why I’m Confident About Investing Through the Down Market

There is no bear market in history that has not been followed by a bull cycle. Rather than fret over…

Read more »

Business man on stock market financial trade indicator background.
Dividend Stocks

2 Undervalued Canadian Stocks Worth a Buy Right Now

Two Canadian stocks are strong buys right now because their current share prices are way below their true values.

Read more »

falling red arrow and lifting
Dividend Stocks

Why Bank of Nova Scotia (TSX:BNS) Stock Fell to Two-Year Lows Last Week

Should you buy BNS stock at such depressed levels?

Read more »

Caution, careful
Dividend Stocks

This Incredibly Common Mistake Can Come Back to Bite Dividend Investors

Are you thinking of buying dividend stocks? Keep these characteristics in mind!

Read more »