Fortis (TSX:FTS)(NYSE:FTS) is a great TSX income stock that should be bought anytime it takes a dive. Shares have recently started to pick up traction after over a year of going nowhere. With bonds still close to the most unrewarding they’ve been in history, there’s a strong case for rotating risk-off funds into top-notch bond proxies just like Fortis.
As a regulated utility with a solid pipeline of predictable cash-flow-generative growth projects, the stock tends to zig when the markets zag and vice-versa. However, it is worth noting that Fortis stock did take a bit of a hit during the COVID-19 market crash earlier last year. With a near-zero beta (currently at 0.06), Fortis should be viewed as a safe haven investment for hard times.
Fortis: Predictability in times of uncertainty
With growing concerns over an unchecked uptick in the rate of inflation, there’s never been a worse time to be a holder of cash and bonds. And with Fortis stock still off over 5% from its all-time high, now is as good a time as any to pick up a few shares as jittery investors rotate out of high-growth stocks and back into value.
At the time of writing, Fortis stock yields 3.7%. The payout is expected to grow at 5-6% every year, regardless of the state of the economy. With the great reopening and economic expansion underway, Fortis stock will not be a name that will make you rich over the short- to medium-term. That title goes to the cheap cyclical stocks. But what Fortis can help you do is batten down the hatches in case any negative surprises present themselves between now and the early innings of the so-called Roaring Twenties.
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Why Fortis is a top TSX income stock
Fortis has been paying dividends for over 40 years, an impressive streak that is likely to hold over the next 40 years.
Fellow Fool contributor Kay Ng recently referred to Fortis as one of two top TSX income stocks to buy and hold forever, praising the company for its high degree of predictability and the low-interest-rate environment, which would give the bond proxy an edge over risk-free fixed-income securities.
“Understandably, in the financial world, owning a piece of a company by buying its common stock is perceived as riskier than lending money to that corporation. However, you’re pretty much guaranteed greater purchasing power by buying and holding Fortis stock for a long time — particularly if you buy it when it’s on sale,” wrote Ng.
I think Ng is right on the money when it comes to Fortis stock. Technically, it’s a risky asset. But when it comes to equities, Fortis and its bountiful dividend are about as close a thing to a guarantee as you’re going to get.
Foolish takeaway on Fortis stock
As inflation jitters rise, I’d look to lock in Fortis’s 3.7% yield today because it’s going to grow at a 5-6% rate moving forward, outpacing inflation by a country mile. Moreover, Fortis stock seems dirt cheap at just 1.5 times book and 2.8 times sales, both lower than the utility industry averages of 2.3 times and 3.5 times, respectively.
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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 Joey Frenette owns shares of FORTIS INC. The Motley Fool recommends FORTIS INC.