Fortis (TSX:FTS) and Emera (TSX:EMA) are Canadian utility stocks with good tracks records of dividend growth. Investors seeking TSX stocks with reliable revenue streams during a potential economic downturn are wondering if FTS stock or EMA stock is good to buy right now.
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Fortis
Fortis operates $65 billion in assets located in Canada, the United States, and the Caribbean. The businesses include power-generation facilities, electric transmission networks, and natural gas distribution utilities.
Fortis generated first-quarter (Q1) 2023 adjusted net earnings of $439 million compared to $369 million in the same period last year. Fortis intends to spend $4.3 billion on projects in 2023 as part of the five-year $22.3 billion capital program. The mid-year rate base is expected to increase to $46.1 billion by the end of 2027 from $34.1 billion last year. That works out to a five-year compound annual growth rate of more than 6%.
The resulting increase in cash flow should support managements plan to boost the dividend by at least 4% annually over the next few years. Fortis raised the distribution in each of the past 49 years, so investors should be comfortable with the guidance.
Fortis stock trades near $56.50 at the time of writing. The stock briefly hit $65 at the high last year, so there is decent upside potential on the next rebound.
Investors who buy the stock at the current level can get a 4% dividend yield.
Emera
Emera delivered an 8% increase in adjusted earnings per share (EPS) compared to Q1 2022. Adjusted net income came in at $268 million compared to $242 million.
Emera has about $40 billion in electric and natural gas utility assets primarily located in Canada and the United States, with some operations also located in the Caribbean. In total, Emera serves 2.5 million customers.
Management is investing up to $9 billion during a three-year capital program through 2025 that will boost the rate base by at least 7%. Roughly 75% of the investments will occur in the Florida operations.
Electric utilities currently make up 83% of the rate base and 17% is natural gas distribution. On a geographical basis, Florida accounts for 62% of the rate base. Assets in Atlantic Canada make up 30%.
The stock trades near $54 at the time of writing compared to more than $64 at the 2022 high. Investors who buy the pullback can get a 5% dividend yield at the current share price. Emera is targeting annual dividend growth of at least 4% through 2025.
Is one a better buy?
Fortis has a larger committed capital program over a longer timeframe and the stock has outperformed Emera by about 7% over the past five years. Based on that, investors might decide to make Fortis the first choice.
Investors focused on passive income, however, should consider Emera. The yield is a full percentage better right now and the dividend-growth outlook over the next two or three years is similar to Fortis.
I would probably split a new investment between the two utility stocks.
