Fortis (TSX: FTS) and Emera (TSX: EMA) are TSX utility stocks with reliable revenue streams that should hold up well during a recession. Investors searching for defensive stocks to add to their retirement portfolios are wondering which one might be good to buy today.
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Fortis
Fortis has a market capitalization near $29 billion and owns $64 billion in assets that provide 3.4 million customers with electricity and natural gas. The businesses include power generation, electricity transmission, and natural gas distribution operations located in Canada, the United States, and the Caribbean.
The stock has enjoyed a nice bounce off 12-month lows. Fortis trades near $59.50 per share at the time of writing, compared to $49 last October, but is still down from the $65 mark it hit in May last year.
Fortis gets 99% of its revenue from regulated assets. This means cash flow tends to be steady and predictable. The company increases revenue through a combination of strategic acquisitions and internal development projects.
Growth is currently coming from the $22.3 billion capital program, which is expected to increase the rate base by about 6% annually through 2027. The resulting boost to cash flow should support planned annual dividend increases of at least 4% over that timeframe. Fortis increased the dividend in each of the past 49 years, so investors should feel comfortable with the guidance.
At the time of writing, Fortis provides a 3.8% dividend yield.
Emera
Emera has a current market capitalization of just under $16 billion. The stock trades for close to $58 at the time of writing compared to $49 in November, but is still down from the $65 it hit around this time last year.
Emera owns about $40 billion in assets providing services to 2.5 million customers across Canada, the United States, and the Caribbean. Like Fortis, these tend to be regulated electricity generation, electricity transmission, and natural gas distribution businesses.
Adjusted net income for 2022 came in at $850 million compared to $723 million in 2021. The capital program over the next three year is expected to be at least $8 billion with 7% to 8% rate base growth through 2025.
This should support steady dividend increases of at least 4% per year over the three years. Investors who buy EMA stock at the current level can get a dividend yield close to 4.8%. That’s competitive with the 1-year Guaranteed Investment Certificate (GIC) rate available through online brokers right now.
Is one a better pick today?
Fortis and Emera pay solid dividends that should continue to grow in the coming years. Investors focused on passive income might want to make Emera the first choice today. The stock offers a better yield and the dividend growth should be similar to Fortis over the medium term.
Fortis, however, has a larger relative capital program and a longer time horizon for dividend expansion supported by the capital projects. The dividend yield is lower right now, but it is hard to argue against owning a stock that has increased its dividend annually for nearly five decades.
