Defensive Investors: You Need This Stock

Defensive investors looking for a stable investment with a massive moat, which can also generate substantial passive income should consider this stock now.

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As the adage goes, you can’t escape death and taxes. When it comes to investing, there’s another thing that’s hard to escape – volatility. Traditionally, when volatility increases, investors turn to defensive stocks. That’s part of the reason why I want to talk to defensive investors about Fortis (TSX:FTS)(NYSE:FTS).

Why defensive investors need to consider Fortis

The market has been on an absolute tear in 2021. So far, the market is up nearly 10%, while over the trailing 12-month period we’re up by over 30%. Keep in mind that approximately one year ago markets were down on pandemic fears.

Now, as much as I love the markets to keep pushing up, I would be remiss if I didn’t state the obvious- a correction can always be around the corner. This isn’t necessarily a bad thing, but it’s something that all investors need to keep in mind. Again, as volatility increases, investors turn to defensive stocks, such as Fortis.

Perhaps coincidentally, Fortis is up 5.7% year-to-date. This is nearly double the growth the stock saw over the trailing 12-month period. In any event, investing in Fortis is a wise addition to nearly every portfolio.

Diversifying your portfolio against an eventual correction isn’t the only reason you should consider Fortis.

What Fortis can offer your portfolio

There are two main reasons why defensive investors continue to flock to Fortis. The first of those reasons is Fortis’ incredible business model.

For those that are unaware, Fortis is one of the largest utilities on the continent. The company has a growing footprint across Canada, the U.S., and the Caribbean. Unlike many of its utility peers, Fortis has taken an aggressive stance on expansion. This has allowed the utility to expand into new markets and provide investors with ample growth.

Fortis’ business model is simple yet lucrative. The company provides a necessary service that is bound by a long-term regulatory contract. Also, note that those contracts typically span a decade or more duration. What this means is that Fortis has a recurring and stable stream of revenue.

That stable stream of revenue helps fund Fortis’ quarterly dividend. That dividend is the other reason why defensive investors absolutely love Fortis. The current yield on the dividend works out to a respectable 3.65%. While that isn’t the highest yield on the market, it is stable, and it continues to grow.

Fortis provides investors with annual upticks to that dividend and has for years. In fact, Fortis has amassed an incredible 47 consecutive years of annual upticks to that dividend. This factor alone should put Fortis near the top of the shopping list of defensive investors everywhere.

Finally, Fortis has committed to continuing those annual upticks. Annual increases near 6% are already planned for the next few years, which should bring Fortis’ consecutive increase tally to over 50 years.

Final thoughts

No investment is without risk. That said, Fortis is one of the most defensive stocks on the market, making it a great option for defensive investors. In my opinion, Fortis should be part of any well-diversified portfolio.

Buy it, hold it, get rich.

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 Demetris Afxentiou owns shares of Fortis Inc. The Motley Fool recommends FORTIS INC.

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