Dividend Investors: Top Canadian Utility Stocks for May 2023

These top Canadian utility stocks plan to boost their dividends.

| More on:
HIGH VOLTAGE ELECRICITY TOWERS

Image source: Getty Images

Retirees and other investors seeking reliable dividends in uncertain economic times might want to consider adding high-quality TSX utility stocks to their portfolios.

Fortis

Fortis (TSX:FTS) owns and operates $65 billion in power generation, electricity transmission, and natural gas distribution assets across Canada, the United States, and the Caribbean. The stock has rebounded considerably off the 12-month low near $49 to the current price of $61.50 but is still short of the $65 it reached in May last year.

Fortis delivered solid first-quarter (Q1) 2023 results. Adjusted net earnings came in at $0.91 per share compared to $0.74 in the same period last year. Fortis is working on a $22.3 billion five-year capital program that will increase the rate base to $46.1 billion by 2027 from $34.1 billion in 2022. The company plans to spend $4.3 billion in 2023.

Management expects the capital program to deliver enough revenue and cash flow expansion to support targeted dividend increases of 4-6% per year through 2027. Fortis raised the payout in each of the past 49 years. At the time of writing, the stock provides a 3.7% dividend yield.

Emera

Emera (TSX:EMA) is another Canadian utility with operations primarily located in Canada and the United States. The company has $40 billion in assets serving 2.5 million customers.

Emera stock has also recovered nicely from the 2022 pullback. The shares trade near $59 at the time of writing compared to $49 in November last year. The stock price hit a peak close to $65 last May.

Emera delivered Q1 2023 adjusted earnings of $0.99 per share, up 8% from Q1 last year. The three-year capital program of at least $8 billion is expected to drive 7-8% rate base growth through 2025. As a result, management is targeting dividend growth of at least 4% per year over that timeframe. The board raised the distribution in each of the past 16 years.

Investors who buy Emera stock at the current level can get a 4.7% dividend yield.

The bottom line on top TSX dividend stocks to buy now

Fortis and Emera are not as cheap as they were last fall, but the stocks still look attractive for investors seeking reliable and growing passive income in an uncertain economic environment. The two companies get the majority of their revenue from regulated utility businesses. Households and commercial locations need to have electricity and natural gas regardless of the state of the economy. As such, these stocks should be good to own through a recession.

Higher borrowing costs due to the sharp rise in interest rates in the past year might put a dent in cash available for distributions, but dividends are still expected to grow steadily in the next few years. This will boost the return on the initial investment.

If you have some cash to put to work in a self-directed portfolio focused on dividends Fortis and Emera are solid Canadian utility stocks that deserve to be on your radar. If you only choose one, I would probably make Emera the first choice today for the higher yield.

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.

The Motley Fool recommends Emera and Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

edit U-turn
Dividend Stocks

Down 11% From its 52-Week High, Can goeasy Stock Turn Things Around?

Investors looking for value should be drooling at goeasy (TSX:GSY) stock. With a higher dividend and more room to run,…

Read more »

calculate and analyze stock
Dividend Stocks

Sun Life Stock Is Paying $3.24 Per Share in Dividends: Time to Buy the Stock?

Sun Life (TSX:SLF) stock recently bumped its dividend upwards by 4%, creating even more value for investors today.

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

Retirees: Here’s How to Boost Your CPP Pension

If you hold dividend stocks like Fortis Inc (TSX:FTS) in a TFSA, you'll take home more income than if you'd…

Read more »

A worker gives a business presentation.
Dividend Stocks

3 Safe Dividend Stocks to Own for the Next 10 Years

Given their consistent performances, healthy growth prospects and solid cash flows, these three dividend stocks are excellent buys for the…

Read more »

A bull outlined against a field
Dividend Stocks

The Bullish Market Left These 3 Stocks Behind, But They’re Buys Right Now

The bullish market left Air Canada (TSX:AC) stock behind.

Read more »

grow money, wealth build
Dividend Stocks

2 Ultra-High-Yield Stocks to Buy Hand Over Fist and 1 to Avoid

I have identified two ultra-high-yield stocks that have fallen to their lows despite strong fundamentals because of sector weakness.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Stocks Under $50 New Investors Can Confidently Buy

Investors looking for strong stocks can be a bit overwhelmed with options. Which is why today we're looking at these…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Cash Kings: 3 TSX Stocks That Pay Monthly

These monthly dividend stocks offer steady and predictable income and high yields, making them attractive to investors seeking regular cash…

Read more »