Attention, Cautious Investors: This Top Dividend King Just Climbed 7% and Can Keep Going

Fortis (TSX:FTS) stock is still down 10% in the last year but up 7% on strong earnings that demonstrate more growth to come.

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In the last month, it’s been looking very good for shareholders of Fortis (TSX:FTS). The Dividend King has seen its shares rise by over 7% in the last month, with shares climbing further after strong earnings. But even more could be in store for shareholders, and new investors looking for passive income from dividends and returns.

About Fortis stock

First off, let’s look at Fortis stock as a company, and how it’s demonstrated such strength. The stock is a North American utility holding company based in Canada. It’s one of the largest investor-owned electric and gas utility companies in North America, serving customers across Canada, the United States, and the Caribbean. 

Fortis owns and operates utility companies that provide electricity, natural gas, and other energy-related services to millions of customers. The company has a diversified portfolio of utility assets, including electric transmission and distribution systems, natural gas distribution networks, and renewable energy generation facilities. This diversified portfolio helps mitigate risks and provides stable cash flows for the company.

What’s more, many of Fortis’s utility operations are regulated, meaning that they are subject to government oversight and regulation. This regulatory framework provides a degree of stability and predictability for Fortis’s earnings and cash flows, as utility rates are often set based on the company’s costs and allowed returns on investment. Furthermore, this has delivered strong cash flows and stable revenue, which we saw recently during earnings.

What happened?

This is what happened during recent earnings, with the company reporting a continuation of its strong track record. To really understand why the first quarter did well, let’s look at the momentum achieved in the two quarters before that.

The third quarter brought in net earnings of $394 million or $0.81 per common share. Revenue hit $2.7 billion as well, an increase from 2022 levels. By the fourth quarter, the company achieved net earnings of $381 million, or $0.78 per common share, marking a drop. The company also announced its outlook, which included continued dividend growth of between 4-6% annually through 2028.

For the first quarter then, the company saw a huge bump. Net earnings came in at $459 million, with $0.93 per common share. Furthermore, it reaffirmed its outlook for the coming year and through to 2028.

Bottom line

With such strong momentum and a recent dividend increase, Fortis stock looks like a solid choice for those seeking passive income — not just through its stellar 50-year dividend but also from returns.

Shares of Fortis stock were down 10% in the last year, trading at 17.37 times earnings and 1.31 times book value. The stock is now up 7% and continues to improve towards 52-week highs, all while achieving a 4.37% dividend yield.

While dividends aren’t everything, investors wanting income can certainly achieve that through Fortis stock. And what’s more, they can likely look forward for more growth as the company continues to work towards its short- and long-term goals.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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