Why Fortis (TSX:FTS) Is a Retiree’s Dream Stock

Invest in one of the safest, most reliable dividend stocks that is currently trading on the TSX and a must-have for every retirement portfolio.

| More on:
Senior Man Sitting On Sofa At Home With Pet Labrador Dog

Image source: Getty Images

Reliable dividend stocks are a crucial ingredient of every healthy retirement portfolio. And if the dividend stock is also an aristocrat, that’s just the cherry on top. But even though pure dividend stocks have their place (especially if you wish to turn them into income-producing assets in retirement), dividend stocks that offer modest capital growth potential should be preferred for healthier overall returns.

Another characteristic that you should look for in dividend stocks you are considering for your retirement portfolio is the long-term prospects of the business you are investing in. Knowing the answers to questions (for example, will the business remain relevant and profitable in the next few decades?) can help you select the ideal candidate.

One stock that combines all the characteristics of a retiree’s dream stock is Fortis (TSX:FTS)(NYSE:FTS).

Preservation of capital

One of the investment characteristics retirees are most concerned with is the preservation of capital. Most retirees have a low-risk appetite and are more concerned about the preservation of capital than above-average returns. But again, there is no use picking a stock (or another investment asset) that only offers preservation of capital and almost nothing else.

The capital preservation aspect of Fortis is tied to its business, utilities, as well as its impressive international presence. Fortis has operations in 10 countries, including Canada and the United States. It has 10 companies to its name, each with its own utility network and service territory.

One of its companies, Caribbean Utilities, is the sole provider of transmission and distribution in Grand Cayman, and it’s also invested heavily in the electrical power generation in the region.

Its competitive edge in the areas it operates combined with an evergreen business of utilities make Fortis one of the safest companies to invest your retirement capital in.

Decent return potential

Fortis has been growing its dividend for 47 consecutive years, and it’s the second-oldest aristocrat on the TSX. The company is quite close to becoming a Dividend King by U.S. standards — a title awarded to companies that grow their dividends for 50 consecutive years.

This endorses the safety of its returns. The 3.85% dividend yield is quite decent, and if you wait for the stock to drop further before buying, you might be able to lock in an even more attractive yield. The 10-year CAGR of 9.5% (which also factors in the dividends) promises modest but sizeable capital gains, enough to outpace inflation without leveraging the dividends.

And the payouts will keep growing. Even a small growth in yearly payouts can help you maintain a dividend-based passive income that might be able to outpace inflation (that’s different from capital appreciation).

Foolish takeaway

From its business model to its presence and history (both dividend and capital growth), there are several reasons why Fortis is a retiree’s dream stock, but that’s not its limit. Fortis is a powerful stock, even if you are decades away from your retirement. It’s a safe dividend stock that can help anchor your portfolio during market fluctuations and crashes. That’s one of the reasons it’s always recommended to beginner investors.

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 recommends FORTIS INC.

More on Dividend Stocks

Payday ringed on a calendar
Dividend Stocks

3 Top TSX Passive-Income Stocks That Pay Out Every Month

Here are some of the best TSX stocks for passive monthly income. Investors should explore to see if they're a…

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Remarkably Cheap TSX Stocks to Buy Right Now

These three cheap TSX stocks are some of the best buys on the TSX, and yet their share price is…

Read more »

think thought consider
Dividend Stocks

This Dividend Stock Could Create $1,353 in Passive Income in 2024

This dividend stock can create massive passive income from two sources, so don't miss out before a recovery in 2024!

Read more »

Increasing yield
Dividend Stocks

TFSA Investors: Buy This Top Bank Stock for High-Yielding Dividends

Generate a superior passive-income stream by investing in this high-yielding dividend stock from Canada’s Big Six banks.

Read more »

grow money, wealth build
Dividend Stocks

2 of the Best TSX Dividend Stocks I Plan on Holding Forever

High-yield TSX dividend stocks, such as Enbridge, offer you tasty yields and trade at significant discounts to consensus price targets.

Read more »

Family relationship with bond and care
Dividend Stocks

TFSA Investors: 3 Cheap Canadian Stocks for Retirees

These three Canadian stocks are super cheap for retirees looking for a great buy that will last the test of…

Read more »

calculate and analyze stock
Dividend Stocks

CPP Disability Benefits: Here’s How Much You Could Get

Not everybody can get CPP disability benefits. If you want some passive income, consider investing in Royal Bank of Canada…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Boosting Your Monthly Income: TSX Stocks That Deliver

Dividend investing can boost regular or active incomes, especially select TSX stocks that pay monthly dividends.

Read more »