While both the market and economic environments remain highly uncertain, it makes sense to look for highly reliable, low-volatility stocks that you can add to your holdings to shore up your portfolio. That’s why one of the best Canadian stocks to consider today is Fortis (TSX: FTS), the massive $27 billion utility stock.
Fortis’ operations are essential, making them highly defensive. Furthermore, they are also regulated by the government. Therefore, in addition to being a highly reliable stock, Fortis has predictable earnings and revenue growth, making it one of the best dividend stocks you can buy.
It can protect your capital, especially if the economic environment worsens. Furthermore, FTS is an ideal stock to buy and hold for the long term since it’s constantly generating passive income for investors and is also increasing the passive income it provides to shareholders every single year.
In fact, Fortis has the second-longest dividend growth streak in Canada, at just shy of 50 years. And in the last five years, its dividend, which has a yield of roughly 3.95% today, has been increased by upwards of 32%.
So if you’re looking for a top Canadian stock to add to your portfolio right now, Fortis is certainly an ideal stock for this environment.
Fortis stock continues to perform well
A stock like Fortis will almost certainly never provide investors with astronomical gains. However, because it’s a low-volatility stock that can protect your capital and grow consistently, it’s an excellent investment to buy and hold long-term.
The company is in the midst of a $22.3 billion five-year capital plan, through which it expects to grow its rate base at a compounded annual growth rate (CAGR) of 6% through 2027. This should grow its rate base from $34.1 billion in 2022 to $41.6 billion by 2027.
Furthermore, due to the growth of its rate base, Fortis stock expects its dividend will grow at a mid-single-digit CAGR through 2027.
Plus, in addition to its near-term growth, Fortis’ initiatives to cut greenhouse gas emissions will require investments in renewables and storage, extending its growth potential beyond the current 5-year plan.
With that in mind, though, Fortis does intend to remain a highly regulated company, not planning to pursue unregulated renewable projects even if it sees growth opportunities in the clean energy transition.
Fortis has been working to strengthen its balance sheet
In addition to expanding its operations, Fortis is also looking at ways to strengthen its balance sheet with the sale of Aitken Creek. This not only helps to lower the risk of investing in Fortis, an already low-risk stock, but by strengthening the balance sheet, it also ensures that the dividend remains ultra-safe.
Fortis announced the sale of Aitken Creek for $400 million on May 1, 2023, as part of the company’s ongoing portfolio optimization effort. The sale will reduce corporate-level debt, strengthen the balance sheet, and provide additional funding flexibility to support the core regulated utility growth strategy.
The sale of Aitken Creek, which has contributed roughly $0.04 of annual earnings per share in the past five years, is expected to actually slightly increase Fortis’ earnings and cash flows, thanks to a lower interest expense resulting from reduced debt.
The sale will also reduce the variability in the company’s annual earnings and might even result in a modest gain upon closing, given that Fortis paid approximately $350 million for Aitken Creek in 2016.
Why is Fortis one of the best investments to make today?
Fortis is one of the best Canadian stocks to buy as a core portfolio stock since it’s the largest, most diversified, and highly regulated investor-owned utility in Canada.
The company’s low-risk, utility-dominated business model makes it ideal for long-term investors, especially in the current market environment.
Plus, at the current market price, Fortis currently has a forward price-to-earnings ratio of 18.9 times, slightly below its five-year average of 19.3 times, making now an excellent opportunity to consider gaining exposure.
So if you’re worried about a potential recession on the horizon or simply want a reliable dividend stock to help boost your passive income, Fortis is one of the top Canadian stocks to look at adding to your portfolio today.
