There’s no shortage of great long-term stocks on the market to consider buying. Given the market volatility that we’ve seen in 2024, that statement carries a great sense of urgency. Fortunately, some stocks offer defensive appeal and a juicy dividend yield.
Fortis (TSX:FTS) is one such stock, and here’s why you should buy it now (and not just for its dividend yield).
Meet Fortis – the defensive king
For those unfamiliar with the company, Fortis is a utility stock. Utilities like Fortis are superb long-term investments to hold, especially during times of volatility.
Part of the reason for that comes thanks to the lucrative business model it adheres to.
In short, utilities like Fortis provide an extremely necessary service for which the company is compensated for. The terms of that arrangement are set out in long-term regulated contracts that often span decades.
More importantly, it also makes Fortis one of the most defensive stocks on the market.
In other words, as long as Fortis continues to provide utility services, it will generate a stable and recurring revenue stream. And it’s that revenue stream which allows Fortis to invest in growth and pay out that very handsome dividend yield.
That stable business model, coupled with an appetite for expansion, has allowed Fortis to grow over the years. The utility is now one of the largest in North America. Specifically, Fortis boasts 10 operating regions across the U.S., Canada, and the Caribbean.
Collectively, that’s 3.5 million customers served across both its electric and gas segments.
Despite Fortis’ massive presence and ability to generate reliable dividends, the company also has shown willingness to invest in growth. This is something that can’t be understated as utility stocks are usually not seen as growth-focused investments.
That appetite for expansion has led to increasingly larger acquisitions over the past decade, allowing Fortis to expand into new markets. Just last month Fortis announced a new $26 billion capital plan to fund growth initiatives over the next five years.
Let’s talk dividends
One of the main reasons why investors continue to flock to Fortis is for its juicy dividend yield. As of the time of writing, that yield works out to 4%, making it a superb dividend pick for prospective investors.
In addition to that juicy yield, investors should also note that Fortis has provided investors with tasty annual bumps to that dividend yield going back an incredible 51 years without fail. The most recent uptick was a 4.2% bump that was announced just last month.
Given the current dividend yield, a $20,000 investment in Fortis will generate an income of just over $800. Keep in mind that those investors who aren’t ready to draw on that income can reinvest those dividends, allowing them to continue growing over time.
There’s more to Fortis than that dividend yield
Fortis offers investors a bit of everything. The company boasts a defensive business model that generates cash. It also has a well-established history of paying dividends and increasing that juicy dividend yield for half a century.
In my opinion, Fortis is a great stock that should be a core holding as part of any well-diversified portfolio.
