Are you finding that your Canada Pension Plan (CPP) benefits aren’t enough to fund your retirement?
Or are you nearing retirement and worrying that your benefits won’t be enough?
If so, you have a few ways to boost your income. If you’re nearing retirement, you can delay it, and perhaps work more hours if you’re below the maximum pensionable amount. If you’re already retired, you can consider investing some of your savings to supplement what you get from CPP. The standard way to do this is to invest in a combination of stock and bond index funds to get some cash flow going.
If you wish to spice up your investment portfolio with individual stocks, read on, because in this article, I will explore one stock that provides its investors with a lot of dividend income.
Fortis
Fortis (TSX:FTS) is a Canadian utility stock with a 4% dividend yield. At a 4% yield, you get $4,000 in annual cash back on every $100,000 invested. Not only that, but Fortis’s dividend has been growing over time.
Over the last 49 years, Fortis has consistently raised its dividend. In fact, it has raised the payout every single one of those 49 years! This is one of the best dividend track records on the TSX stock market index. If Fortis pulls off another dividend hike this year, it will become a Dividend King — a stock with 50 years of dividend increases. This could benefit shareholders by getting FTS included in dividend-growth funds and other such pooled investment vehicles.
Why it’s so reliable
Fortis’s dividend growth has been reliable because of two factors:
- The built-in advantages that all utilities enjoy.
- Some specific decisions Fortis’s management has made.
First, let’s discuss the built-in advantages. Utilities are essential services. They are tied to a person’s home. You can’t just “exit” a heat and light bill; you have to have it. So, people keep paying their heat and light bills, even in recessions. Most would prefer to sell their cars rather than go cold in the winter.
Second, Fortis has invested heavily in growth. It spent the last few decades buying utilities across Canada, the U.S., and the Caribbean. It is working on a capital spending plan to increase its rate base. All of these investments have led to FTS outperforming the TSX utilities sub-index.
Can it achieve another year of dividend growth?
Having reviewed Fortis’s past few decades of results, it’s time to answer the all-important question:
Can it achieve another year of dividend growth?
In my opinion, yes, it can. Fortis’s growth in revenue and earnings has been positive this year. It typically announces its dividends in its September earnings release, which is just around the corner. It will likely report higher earnings for the entire 12-month period, regardless of what happens in the third quarter. As a result, it will be able to hike its dividend without increasing its payout ratio. So, I’d expect a 6% dividend hike, consistent with the company’s long-term goals.
