Canadian utilities proved to be a very reliable hold in the face of the COVID-19 pandemic. Indeed, utility stocks are equities that come close to delivering the same dependability as a fixed-income vehicle. The S&P/TSX Capped Utilities Index rose 0.80% to close out the previous week on Friday, April 18.
Today, I want to focus on one of the top utility stocks on the TSX: Fortis (TSX: FTS). In this piece, I will discuss why I’m looking to stack shares of this highly dependable dividend stock for the long road ahead. Let’s jump in.
How has this dividend stock performed over the past year?
Fortis is a St. John’s-based utility holding company. Shares of this reliable dividend stock have climbed 6.5% month over month at the time of this writing. Meanwhile, the stock is up 8.1% so far in 2023. Unfortunately, Fortis shares are still down 5.5% year over year. Investors who want a more detailed look at its recent performance can toggle the interactive price chart below.
Should investors be excited about Fortis’s recent results?
This company unveiled its fourth-quarter (Q4) and full-year fiscal 2022 earnings on February 10, 2023. In Q4 2022, Fortis posted adjusted net earnings of $347 million — up from $300 million in the previous year. Meanwhile, adjusted basic earnings per share (EPS) rose to $0.73 compared to $0.63 in Q4 fiscal 2021. In this quarter, the company was bolstered by rate base growth, improved retail electricity sales, higher transmission revenue at UNS Energy, better hydroelectric production in Belize, and the timing of FortisAlberta expenses. Indeed, Fortis flexed its domestic and global muscle in the final quarter of the fiscal year.
For the full year, Fortis saw adjusted net earnings increase to $1.32 billion, or $2.78 per basic share — up from $1.21 billion, or $2.59 per basic share, in the previous year. In this case, the company was powered by improved electricity sales and transmission revenue in Arizona. Moreover, Fortis benefited from earnings growth at Aitken Creek. Investors should be please with its 7% EPS growth over fiscal 2021.
Fortis’s earnings were very solid in fiscal 2022. However, I’m more excited about the milestone that this dividend stock is nearing in this decade.
Why I’m stoked about the future for this dividend stock!
In previous quarters, Fortis has expanded on its ambitious five-year capital plan that now spans from 2023 through 2027. Moreover, it is now worth $22.3 billion over that forecast period. This massive investment is expected to grow Fortis’s midyear rate base from $34.1 billion in 2022 to a whopping $46.1 billion by 2027. That would represent a compound annual growth rate (CAGR) of 6.2%.
Better yet, Fortis’s rate base increase is projected to support a dividend-growth guidance of 4-6% annually through 2027.
This dividend stock has delivered 49 consecutive years of annual dividend growth. A Dividend King is a stock that has achieved 50 straight years of dividend increases. That means Fortis is one year away from obtaining that coveted dividend crown. Meanwhile, it would be the second TSX stock to do so after Canadian Utilities. Fortis currently offers a quarterly dividend of $0.565 per share. That represents a 3.7% yield. This is a dividend stock with a virtually peerless track record on the Canadian market. That is why I’m stacking shares of Fortis this spring.
