One of the most rewarding aspects of investing is finding that perfect must-have income-producing stock you can hold forever. In short, buying shares of those stocks today can be a lucrative opportunity for massive long-term growth.
But what stock should you keep buying shares hand over fist? The answer to that question may surprise you.
A stock to hold forever
That stock that I absolutely love and plan to keep buying shares of is Fortis (TSX:FTS). For those that are unaware of Fortis, the company is one of the largest utilities in North America. Fortis has operations across 10 regions in North America that includes parts of Canada, the U.S., and the Caribbean.
Fortis’s stable business model is both predictable and growing. That stable revenue stream is backed by long-term regulatory contracts that often span decades in duration. In total, the company boasts over 3.4 million utility customers across its massive network, which includes both gas and electric segments.
That’s an incredible defensive moat. In fact, there are few stocks on the market today that are as defensive as Fortis. Unlike discretionary consumer spending or even the necessity in grocery shopping, the service that Fortis provides can’t be traded down. This feat makes Fortis one of the best long-term candidates for any well-diversified portfolio thanks to that immense defensive moat.
And that’s not even the best part.
Fortis isn’t as boring as you think it is
Utility stocks like Fortis are often perceived as being boring stocks. This is because they adhere to a stable business model that rarely changes. The belief is that the stability and thin margins in that business model leave little room after dividend payouts to invest in any real growth.
That view couldn’t be further from the truth.
Unlike many of its traditional utility peers, Fortis has taken an aggressive stance on growth. In fact, the company has ballooned from $390 million in assets to well over $64 billion in under four decades. During that time, Fortis executed a series of well-timed acquisitions that expanded the company’s footprint into new markets.
In recent years, that growth has shifted internally towards upgrading its existing facilities and transitioning over to renewables. Fortis has allocated billions in a capital investment fund for that very purpose.
Turning to results, Fortis announced results for the most recent quarter just last month. In that quarter, the company reported net earnings of $370 million, or $0.77 per common share. This bettered the $328 million, or $0.69 per common share, reported in the same period last year.
Don’t forget: Fortis is a great income stock
One of the reasons why I keep buying shares of Fortis is thanks to the company’s superb dividend. Fortis pays out a quarterly dividend that currently offers a yield of 4.23%. This means that a $40,000 investment in Fortis will produce an income of just shy of $1,700 in the first year.
Prospective investors should be aware of two key ways to grow that potential income even further.
First, investors not ready to draw on that income yet can reinvest it until needed. This is especially true for investors with a decade or more until retirement. This leads me to my second point: dividend hikes.
Fortis has an established cadence of providing investors with an annual uptick to that dividend. In fact, Fortis has continued that tradition for an incredible 49 years without fail. It also means that Fortis is on track with its next increase to become only the second Dividend King in Canada with 50 consecutive years of increases.
In short, the long-term potential of Fortis is off the scale: yet another reason why I want to keep buying shares of this dividend stock.
Why I keep buying shares of this dividend stock
No investment is without risk, and that includes Fortis. Fortunately, Fortis provides stellar growth prospects, a juicy income, and enough defensive appeal to bolster any long-term portfolio.
In my opinion, Fortis should be a core holding of any well-diversified portfolio.
Buy it, hold it, and watch your income grow.
