The market provides plenty of great investment opportunities for every type of investor. Among those great buys, is Fortis (TSX:FTS). Here’s why Fortis stock is an investment for every single investor to consider right now.
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Reason #1: You need some defence
Fortis is one of the most defensive stocks on the market. For those unfamiliar with Fortis stock, the company is one of the largest utilities in North America. Specifically, Fortis has a presence in Canada, the U.S., and the Caribbean.
But what makes Fortis a defensive stock for your portfolio? The answer is Fortis’s business model.
Utilities like Fortis are highly regulated businesses. They generate a consistent and recurring revenue stream that is backed by regulated contracts. In most cases, those contracts last decades in duration.
In the case of Fortis, the company is 99% regulated across both electric (82%) and gas (17%) segments. That reliable source of revenue allows Fortis to invest in growth and pay out a handsome dividend (more on that in a moment).
More importantly, it means that Fortis stock is less volatile than many other options on the market right now.
Reason #2: Timing is important. Income is, too
Despite the highly defensive operation that Fortis offers, the stock is down a whopping 11.9% over the trailing two-year period.
Not only does this make it a great time for long-term investors to consider buying Fortis, but it also means that Fortis’s dividend has pushed higher. As of the time of writing, the yield on Fortis’s quarterly dividend works out to a respectable 4.45%.
This means that investors who drop $30,000 into Fortis stock (as part of a well-diversified portfolio) can expect a first-year income of just over $1,330. The reason I say first-year income is because of another key point for prospective investors.
Fortis has provided investors with a generous uptick to its dividend for an incredible 50 consecutive years. This makes the company one of only two Dividend Kings on the market.
The company also plans to continue that cadence over the next few years.
In other words, long-term investors contemplating Fortis stock should note its appeal as a buy-and-forget candidate for any portfolio.
Reason #3: Growth is real
One of the stereotypes often associated with utility stocks is that they are boring stocks that lack any growth. The rationale behind that view is that there is little incentive (or revenue) to invest in growth given that dividend and recurring revenue stream.
Fortis breaks from this stereotype in two key ways.
First, the company continues to provide juicy annual upticks to its dividend. Specifically, Fortis is forecasting increases of 4-6% over the next five years.
Second, Fortis has taken an aggressive stance on growth. The company has developed a knack for identifying growth targets over the years. That’s part of the reason why the company has grown from a sub $400 million operation to a $66 billion behemoth in under four decades.
That trend is set to continue as Fortis executes its whopping $25 billion, five-year capital plan. That plan calls for additional growth and dividend increases.
Fortis stock: Buy it
No stock is without risk, and that includes Fortis. Fortunately, Fortis stock is an appealing option for both seasoned and new investors alike. The company offers both growth and income-earning potential in a defensive package.
In my opinion, Fortis stock is a great addition to any well-diversified portfolio.
