Investors in the stock market are always looking for companies that will continue providing positive returns for a very long time. Fortunately, there are a number of good long-term buys in the Canadian market. Many top value and income stocks generate excellent total returns over the long term. However, Fortis Inc. (TSX:FTS) remains one of my top picks for investors seeking dividend growth over time.
Here’s why I think Fortis is worth buying at its current valuation, for those looking to hold for the next decade.
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Fortis’ business model is worth paying attention to
As a leading regulated utilities player in the North American market, Fortis’ cash flows are unparalleled. Unless its clientele wants their lights and/or heat turned off, they’ll make their monthly payments to Fortis. In the Canadian market, these factors are more important perhaps than anywhere else in the world. Thus, it’s no surprise to see Fortis has a world-class cash flow profile unlike most stocks in the market.
The company owns and operates 10 utility distribution and transmission assets in Canada and the United States. Altogether, it caters to more than 3.4 million customers. Fortis’ breadth and diversified client base provides defensive exposure in times of uncertainty.
It is popular among investors as a stable stock with low volatility, known for consistently paying dividends for many years. Presently, the stock seems to be undervalued, trading at a reasonable 17.7 times trailing earnings.
Reasons to buy and hold
As Fortis expands its base rate, the company expects to boost both its dividend payouts and earnings. As one of the top dividend growth stocks on the market, Fortis continues to generate interest from income investors. Indeed, this is a top reason why I like this stock. Fortis hasn’t missed an opportunity to raise its dividends in five decades. Yup, that’s right, 50 years.
Recently, the company announced new electric rates, which will be implemented for UniSource Energy Services customers starting February 1. These adjustments aim to cover increasing costs and contribute to the ongoing investments in maintaining a secure and dependable service.
These updated rates will enable UniSource to distribute the costs of new generating resources more gradually in the future. The introduction of the new System Reliability Benefit mechanism is intended to facilitate investments that contribute to maintaining affordable and dependable service for customers.
Bottom line
Fortis’ rock-solid business model, incredible dividend profile, and impressive valuation relative to its long-term prospects make this stock a screaming buy at current levels. In my book, there are few better Canadian stocks on the market to consider right now.
