Fortis (TSX:FTS) is often regarded as one of the best long-term options for investors to consider. But in this volatile market of surging yields and discounted stocks, is it too late to buy Fortis stock?
Let’s try to answer that question.
First, an introduction
Most investors know Fortis, but few may realize just how lucrative the company’s business model really is.
Fortis is one of the largest utility stocks in North America. The company boasts 10 distinct utility operations located across Canada, the U.S., and the Caribbean. That includes 3.5 million utility customers across both electric and gas segments.
The sheer necessity of the services provided makes Fortis an incredibly defensive investment, irrespective of how the market fares. That’s because the services that Fortis provides are backed by regulated contracts, which can span decades.
The predictable revenue stream from that business model provides Fortis the opportunity to invest in growth initiatives and pay out a very handsome dividend.
Growth as it pertains to utility stocks is often misunderstood because of a long-standing stereotype. The stereotypical view of utilities like Fortis is that they are huge, slow-moving, and are unable to, or unwilling to, invest in growth.
Fortunately, Fortis’s approach to growth differs from its peers and that stereotype.
Fortis has taken an aggressive stance on growth, which is part of the reason why the company has become the $66 billion behemoth it is today. Fortis has made strategic acquisitions over the years that have bolstered its presence in existing markets and expanded into others.
More recently, that appetite for expansion has turned to its internal operations. More specifically, Fortis has earmarked billions in capital improvement funds. This includes both enhancing existing facilities and transitioning to renewables.
Don’t forget the dividends!
One of the main reasons why investors love Fortis is for the stable dividend that it offers. The company provides a quarterly dividend to investors and has given annual upticks to that payout for an incredible 50 consecutive years.
That fact alone puts Fortis into nearly exclusive company as one of only two Dividend Kings in Canada. By extension, it provides current and prospective investors with yet another reason to buy this buy-and-forget stock.
As of the time of writing, the yield on Fortis’s dividend works out to a solid 4.42% yield. This means that investors who put $40,000 towards Fortis today can start earning an income of just over $1,800 in just the first year.
Factor in those expected annual upticks and reinvestments, and Fortis could be a very solid contributor to any long-term portfolio. That alone argues the point that it’s not too late to buy Fortis stock.
Is it too late to buy Fortis stock?
In a word, no. Fortis is a long-term investment. The stock may be weak right now when compared to other higher-performing options on the market, but that’s a reflection of the market, not Fortis.
Fortis is still, in my opinion, a solid long-term option that should be a core holding for any well-diversified portfolio.
Buy it, hold it, and watch it grow.
