Dividend stocks are the favourite of investors who desire safe income from their investments. However, to ensure that these assets generate stable income in the long run, choosing companies with strong financials and adequate growth prospects is essential.
In this regard, Fortis (TSX:FTS) can be an excellent choice.
Here’s why I think this stock is worth considering, and it’s not just because the company has raised its dividend for five consecutive decades.
Consistent dividend increases are important
Of course, the fact that Fortis has been as consistent as it has with dividend increases is a primary reason to own the stock. Indeed, in this day and age, finding a company that’s continued to return capital to shareholders at this rate isn’t easy.
The company’s most recent dividend distribution of $0.56 per share in the second quarter (Q2) of 2023 marked the 50th consecutive year of payout increases by the company. This amount also coincided with a payout ratio of a little more than 76%, which isn’t bad considering how long and how hard the company has focused on its capital redistribution.
With a current yield of 4.2%, investors would be hard-pressed to find a company more worthy of a long-term hold as a dividend stock right now.
Strong performance in Q2 2023
Fortis reported a spectacular financial performance in the second quarter of 2023. The company posted net earnings of $294 million ($0.61 per common share), which is a substantial jump from last year’s same quarter’s $284 million ($0.59 per common share).
Its adjusted net earnings also appreciated to $302 million from last year’s $272 million. Additionally, in the first six months of 2023, Fortis had capital expenditures worth $2 billion. This indicates that the company is on track with its $4.3 billion annual capital-investment plan.
Fortis receives a thumbs-up for its major capital projects
The Canadian energy giant recently got the British Columbia Utilities Commission’s (BCUC) approval for starting its Advanced Metering Infrastructure project. It involves replacing residential and small commercial metres with upgraded versions. This will help facilitate safety and resilience, along with improving the efficiency of gas distribution systems. As per company sources, this project may start later this year.
Furthermore, BCUC granted permission to FortisBC Energy (Fortis’s subsidiary) for the Eagle Mountain Woodfibre Gas Line project’s revised transportation rate schedules. This move will help bring the entire project one step closer to entering its construction phase.
Plenty of growth ahead
Central Hudson (a subsidiary of Fortis), which has a minority equity interest in New York Transco LLC (Transco). It is a joint venture that aims to construct, operate, and own electricity transmission projects in the state of New York.
Now, Transco is planning to build energy transmission infrastructure with a minimum capacity of 3,000 megawatts to deliver power from Long Island-based off-shore wind facilities. The company will invest around US$2.2 billion in this project. As per reports, Central Hudson will contribute around 10% of the share.
In the long run, such investments will enable the company to increase its presence in the U.S. market and emerge as a major player in the country’s energy industry.
Bottom line
Keeping in mind the above factors, Fortis has excellent financials and growth prospects, which can help it provide increasing dividend payouts every year. Thus, investors who want a safe income should definitely go for this stock.
