If there were a word to describe how the market has performed this year and what many investors expect for next year, it would be volatile. And during times of market volatility, investors turn to the appeal of defensive stocks, like these top Canadian utility stocks.
In Canada, when a dividend-paying stock manages to increase its payout for a whopping 50 consecutive years, it is considered a Dividend King. We are now fortunate enough to have two Dividend Kings on the market for investors to consider.
Oh, and they are both top Canadian utility stocks to consider buying right now. Let’s take a closer look at both options.
Meet Fortis
For those unfamiliar with the stock, Fortis (TSX:FTS) is one of the largest utilities on the continent. The company boasts 10 operating regions across the U.S., Canada, and the Caribbean.
Those operating regions include power generation and transmission as well as natural gas distribution. The overwhelming majority of that business is based on long-term regulated contracts which span decades in duration.
Another key point that investors should note is that Fortis, unlike many of its traditional utility stock peers, has taken an aggressive stance on growth. This includes both acquisitions as well as transitioning over to renewable energy types. Those efforts are funded by a whopping $25 billion capital improvement program.
Turning to income, Fortis offers investors a juicy quarterly payout. Fortis hit Dividend King status this year, and plans to continue its annual uptick through 2028, averaging 4% or better.
As of the time of writing, the yield on that dividend works out to an impressive 4.42%. This means that investors who drop $30,000 into Fortis (as part of a larger, diversified portfolio) can expect an income of just over $1,300.
Meet Canadian Utilities
Canadian Utilities (TSX:CU) is another of the top Canadian utility stocks that investors should consider. Like Fortis, Canadian Utilities has both distribution and transmission operations. Those segments, in turn, provide a very defensive, regulated, and predictable flow of revenue for the company.
Turning to growth, Canadian Utilities continues to invest in new assets, including those that are renewable in nature. Earlier this year, the company acquired two existing wind assets as well as a series of wind and solar projects in various stages of development.
In addition to operations in Canada, Canadian Utilities also has operations in Mexico, Puerto Rico and Australia.
Switching to income, Canadian Utilities offers investors a whopping 51 consecutive years of dividend increases. As of the time of writing, the yield on the company’s quarterly dividend works out to an impressive 6.10%, making it one of the better-paying options on the market.
As of the time of writing, Canadian Utilities trades down over 18% year to date. This makes it a superb, discounted option for any long-term portfolio.
These top Canadian utility stocks are great buys right now
Even the most defensive stocks, like Fortis and Canadian Utilities, carry some risk. That’s why the importance of diversifying your portfolio cannot be understated.
Fortunately, both Canadian Utilities and Fortis provide defensive appeal and growth prospects that minimize that risk. They both also boast a growing respectable dividend.
In my opinion, one or both stocks should be a core holding in any well-diversified portfolio.
