After a volatile start to the year, rising interest rates and crazy inflation, the market seems to be coping well and surprisingly, rising. Year-to-date the market is churning ahead with a 6% gain. But for those investors who would rather avoid volatility, there’s another top option for safe income.
The option for safe income that investors should consider is Fortis (TSX:FTS). In short, Fortis boasts a juicy dividend and growth potential that is packaged in a defensive shell.
Here’s a look at why this is the stock for investors to buy right now.
Why utilities like Fortis are great stocks
Fortis is one of the largest utilities in North America, with 10 operating regions that cover parts of Canada, the U.S., and the Caribbean.
Utility stocks are some of the most defensive investments on the market, and for good reason. The stable and reliable business model that they adhere to provides a stable and recurring source of revenue. That revenue allows the company to then invest in growth and pay out a generous dividend.
Part of the reason for that stability is that Fortis’ business is overwhelmingly regulated and subject to long-term contracts that typically span decades. The sheer necessity of the utility service offered also reduces the volatility we see in other areas of the market during pullbacks.
In other words, we don’t see a trading down effect with utilities as we do in other areas of spending, such as retail.
In addition to that defensive appeal, Fortis is known for its aggressive stance on expansion. The company isn’t one to rest on its laurels given its stable business model.
One of the main reasons why Fortis has grown rapidly over the past four decades into a $66 billion behemoth is its approach to growth. That includes both its electric and gas arms, which collectively boast 3.5 million customers.
Another reason why Fortis is a top option for safe income
One of the main reasons why investors love investing in Fortis is for the stable and growing income it provides. As of the time of writing, Fortis offers a respectable 4.42% yield.
This means that investors who can drop $40,000 into Fortis can expect to generate an income just shy of $1,800. Even better, that income is only for the first year.
That’s because Fortis has provided investors with generous annual upticks to that dividend for 50 consecutive years. This makes Fortis one of only two Dividend Kings on the market with that incredible streak.
Even better, Fortis plans to extend that streak for several more years. Additionally, prospective investors who are not yet ready to draw on that income yet can also choose to reinvest that income until needed. This will allow the investment to grow further.
In other words, investors looking for a top option for safe income growth can add Fortis to their portfolio.
Final thoughts
No investment, even the most defensive is without some risk. In the case of Fortis, the company offers a reliable revenue stream, solid growth potential, and one of the most stable dividends on the market.
In my opinion, Fortis is a top option for safe income and should be a core holding in any well-diversified portfolio.
