This Stock Has Raised Its Dividend for 50 Years, and It Could Soar in 2024

Fortis (TSX:FTS) stock has a great setup for 2024.

| More on:
Golden crown on a red velvet background

Image source: Getty Images

A dividend king is a stock that not only pays, but raises its dividend for 50 consecutive years. There aren’t many of them out there. According to Sure Dividend, there are exactly 54 dividend Kings in the world today, and Canada is home to some of them. In this article, I will explore the one Canadian “dividend King” stock that could rally in 2024 if interest rates come down.

Fortis

Fortis Inc (TSX:FTS) is Canada’s very own dividend King. It acquired its “Kingly” status earlier this year, when it raised its dividend for the 50th consecutive year.

The only criteria a stock needs to meet to become a dividend King is 50 years of dividend increases. A stock does not need to be in the S&P 500 or meet a market cap minimum to be a King. As a result, there are many dividend kings that are not dividend aristocrats. That might seem surprising, since investors are used to thinking of Kings as the higher ranking aristocrats. In this case, that’s not an accurate description of the situation. Fortis is a dividend King, but not a dividend Aristocrat, for the simple reason that it is not part of the S&P 500.

Why FTS has a good setup for 2024

One reason why Fortis has a good setup for 2024 is the fact that interest rates are expected to fall this year. High interest rates are bad for utilities, as such companies tend to have high amounts of debt. Debt is one thing that Fortis definitely has in spades. In its most recent quarter, it has $27 billion in debt, which produced $1.3 billion in annual interest expenses. Also, the company has $20 billion in common equity, giving it a 1.4 debt/equity ratio – lower than one is normally considered bad news, so Fortis’s 1.4 indicates high solvency. All-in-all, Fortis has very mixed signals from the various factors affecting its business.

The good news is that interest rates are expected to fall next year. The last inflation readings from both the U.S. and Canada showed inflation just barely above 3%, meaning that the Fed’s goal (2%) is within striking distance. If the Fed starts cutting rates, then Fortis will likely benefit from it, because it’s a highly indebted utility that tends to do better when rates – its borrowing costs – are low.

Risks to watch out for

I have so far outlined some pretty compelling facts about FTS stock. Now it’s time to look at one big negative:

The possibility of interest rates rising once again in 2024. There are several active conflicts in the world right now, including major ones in Israel/Gaza and the Ukraine. Conflicts have been known to affect the price of oil from time to time, usually taking it higher. In this case, we have an active conflict in the world’s #1 oil producing region (the Middle East). So, we could easily see the price of oil rise again. If that were to happen, then other commodities would likely follow suit, leading to an inflation spike. That could cause central banks to go back to hiking rates, instead of lowering them. Fortis would not do well in that scenario.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

grow dividends
Dividend Stocks

2 Dividend Stocks to Use as Building Blocks for Lasting Wealth

Dividend stocks that are raising their dividends over time could create lasting wealth for investors. Here are a couple of…

Read more »

Glass piggy bank
Dividend Stocks

New Investors: How to Make the RRSP Work for You Now and Not Just in Retirement

The RRSP can work for you in retirement, but it can also bring huge benefits right now for investors looking…

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Retirees: 2 High-Yielding Dividend Stocks to Buy Today

These TSX dividend-paying stocks can be a retiree’s best friend in their self-directed portfolios for additional income in retirement.

Read more »

money while you sleep
Dividend Stocks

2 Stable Stocks for Sleep-Better Investing

Boasting rock-solid underlying businesses and great financials, these two stable stocks can be perfect holdings for your portfolio.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

After their recent declines, these two Canadian dividend stocks look even more attractive to buy for the long term.

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

3 Common Investing Mistakes Almost Every Investor Makes

New investors, don't fall into these lesser-known mistakes many make over and over again! Instead, choose this investment for growth.

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Dividend Stock Down 15% to Buy Right Now

This top TSX stock has increased the dividend annually for five decades.

Read more »

Gas pipelines
Dividend Stocks

TFSA Passive Income: Is Enbridge Stock a Buy, Sell, or Hold?

Enbridge now offers a yield near 8%. Is the dividend safe?

Read more »