As far as dividend stocks go, Fortis Inc. (TSX:FTS) is unmatched. With 50 years of dividends that have been both growing and reliable, this company has paved its way to become the dividend king that it is today. Over the long run, investors have done well investing in Fortis stock.
Here’s why Fortis stock is a no-brainer dividend stock.
Fortis’ track record of dividend growth – 50 years and counting
Being able to pay out dividends every year for 50 years is an accomplishment in and of itself. Increasing those dividends every year for 50 consecutive years is an even bigger accomplishment. This is what Fortis has done.
In the last 20 years, Fortis has increased its annual dividend by 354% to the current $2.26 per share. This equates to a compound annual growth rate (CAGR) of 7.86%. So, Fortis stock has clearly been a winner even if we just look at this dividend history in isolation.
If we add Fortis’ stock price performance to this, we get an even more positive picture. In the last 20 years, Fortis’ stock price has appreciated 245% to the current approximately $53 per share. This tells the complete story of the shareholder value that Fortis stock has created.
Fortis offers investors predictability
Fortis is a $26.1 billion utility giant with a diverse geographic footprint and asset mix. This means that the company has a revenue profile that’s regulated. In turn, this translates into steady, secure, and predictable revenue – qualities that are highly valuable.
This predictability and reliability allow Fortis to feel confident in its ability to continue to increase dividends in the years ahead. In fact, at the company’s recent investor day, management announced that they have extended their dividend growth guidance of 4% to 6% through to 2028 (prior guidance was until 2027).
And when it comes to dividend stocks, this predictability and stability matters a lot. It is what enables a company to consistently pay out and increase its dividend. It’s part of what makes Fortis stock a no-brainer dividend stock.
Fortis continues to outperform
Fortis’ third quarter 2023 earnings result showed a continuation of the trends we have been seeing – strong earnings and cash flow growth. In fact, adjusted EPS increased 18% to $0.84 and operating cash flow of $940 million was up 48%. This result was ahead of expectations that were calling for EPS of $0.81.
These results reflected continued rate increases as well as population growth and new cost of capital parameters at FortisBC.
In the five years ended 2022, Fortis’ revenue has increased 32% to $11 billion. Also, its earnings per share increased 11% to $2.78, and its cash flow from operations increased 19% to $3 billion. This is a testament to the steady growth that we can expect to continue to see from Fortis. This is what makes Fortis stock an exceptional dividend stock.
The bottom line
A steadily growing business that has pricing power, guaranteed customers, and a bright future is naturally an attractive dividend payor. All of this has played out for Fortis over the many decades, and with continued growth expected ahead, we have every reason to believe it will continue well into the future.