Looking for high-yield dividend stocks in the Canadian market? If yes, you should be looking for utility stocks that are known for their resilience across market cycles and high dividend yield. Fortis (TSX:FTS) is one of the top dividend-yield stocks on TSX for its long-term prospects.
This stock is in the limelight as its price is up 11.3% over the past three months and 11.83% over the previous six months, now trading above $60 per share. Let’s dive into why this top utilities giant could still be undervalued at these levels and where the stock may be headed from here.
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Investors want stability
One of the key reasons for Fortis’s impressive rise (I’d argue) is that demand for utility stocks is rocketing higher. Amid surging electricity demand right now and projections that we’re going to need a tremendous amount of energy in the future, companies like Fortis have thrived and seen their valuations increase proportionately.
Now, I’d suggest that the company’s current multiple of just 19 times earnings isn’t onerous, especially when one considers where the market multiple is right now. With a dividend yield of more than 4% (and a 50-year track record of dividend hikes over time), this is a company with an excellent multiple relative to its dividend growth prospects in a defensive industry worth considering.
I think the narrative around Fortis really comes back to its defensive business model and the stability of its cash flows. As a regulated utility in some of Canada’s key markets, this is a company with the potential to outperform over the long haul.
Dividend growth matters
So long as growth materializes as many expect, this utility giant could deliver even greater dividend increases over time than what the market has priced in.
Fortis has previously signalled to investors that the company will likely raise its distribution by around 6% per year for the next few years. Of course, looking out further, the waters get murkier. But that’s where I think the company’s growth projections come into play. If earnings growth can stay sustainably in the high single-digit or low double-digit range, this is a stock that could ramp up its dividend increases further.
For income investors or those seeking passive income, that’s a great thing. In my view, Fortis remains a top stock for investors looking for stability, income, and value to consider right now. There are simply few better Canadian stocks in the market right now, in my view.
