Choosing a dividend stock that can withstand weak markets and adverse market conditions like crashes, slumps, and corrections is relatively easy. Aristocrats with long histories of dividend growth through weak markets are a safe bet, as they tend to maintain and even grow their payouts despite market conditions.
However, it can be challenging to choose a stock that may not just maintain its dividends but also have a relatively healthy valuation. No stock may be safe from a market-wide or sector-wide dip, but we can limit ourselves to dividend stocks that can make for a timely or quicker-than-market recovery during a bear market phase. One stock that fits the bill on both fronts is Fortis (TSX:FTS).
Factors behind Fortis’ resilience
The primary factor influencing Fortis’s resilience in weak markets is its business – utilities. Even though utility businesses are cost-intensive because they rely on expensive infrastructure to develop and maintain, they also tend to be financially healthy because most of their revenues rely upon utility bills, which are treated as one of the most necessary expenses in most households.
Fortis has enhanced these strengths with a geographically diversified business, offering electricity and natural gas utilities to about 3.5 million consumers in 10 different markets. The company has assets worth about $66 billion, and 99% of them are tied to regulated utility assets, adding another layer of safety to its revenues.
Performance and dividends
Fortis is easily among the safest and most revered picks when it comes to dividends. This stems not only from its business model and financial strengths but also from its stellar dividend history. The company has been growing its payouts for about 49 consecutive years, the second longest dividend growth streak in Canada, and just one year away from becoming Canada’s second dividend king.
The dividend growth is not just cosmetic. Between 2014 and 2024, the company has grown its payouts by about 84%. This is more than enough to ensure that your dividend-based passive income remains ahead of inflation.
The stock performance is not nearly as illustrious, but it’s still quite decent. The stock rose by about 59% in the last 10 years. It experienced a relatively swift recovery after the 2020 market crash and hasn’t sunken too harshly in market-wide corrections in the past. It’s currently discounted right now, which has made its valuation attractive and beefed up its yield to 4.6%.
Foolish takeaway
Fortis is easily one of the top dividend stocks currently trading in Canada, offering a healthy combination of dividends and capital appreciation (at least preservation) potential. You can trust the stock to maintain a healthy stream of dividends in almost any kind of market, making it perfect for bullet-proof passive income development.
