When it comes to building wealth and securing financial stability, dividend stocks are often a cornerstone of successful investment strategies. Among the numerous dividend-paying stocks on the TSX or Toronto Stock Exchange, Fortis (TSX:FTS) stands out as a “Dividend King” that retirees, long-term investors, and income-seekers can confidently hold forever.
Here’s why I think this top TSX stock is worth holding in the long term.
Why Fortis?
Fortis is a leading utility company operating across Canada, the United States, and the Caribbean. Its core business revolves around regulated electric and gas utilities, ensuring stable and predictable revenue. Fortis has grown into one of North America’s most trusted utility providers, serving over 3.4 million customers.
The company’s resilience stems from its essential service model — electricity and gas are necessities, not discretionary goods. This inherent stability allows the company to generate consistent cash flows, making it a reliable choice for income-focused investors.
Fortis has achieved the rare distinction of being a “Dividend King,” a title reserved for companies that have increased their dividends for 50 or more consecutive years. Fortis’s nearly half-century dividend-growth streak reflects its robust business model and prudent management. Few companies globally can match this level of consistency and commitment to shareholder returns.
Currently, Fortis offers a dividend yield of approximately 4%, making it a compelling choice for investors seeking steady income. Its dividend payouts are supported by strong earnings and predictable cash flows from regulated operations. Moreover, the management of Fortis remains committed to future dividend growth, targeting an average annual increase of 4-6% through 2028.
Stability and resilience in any macro backdrop
Investors often gravitate toward utility stocks during periods of economic uncertainty, and for good reason. Fortis operates in a highly regulated industry, which protects against market volatility. Even during recessions or inflationary periods, people rely on electricity and gas, ensuring steady demand for Fortis’s services.
Fortis also maintains a diversified geographic footprint, reducing exposure to regional economic risks. Its 10 utility operations across North America contribute to its resilience, with regulated assets accounting for approximately 99% of its earnings. This stability makes Fortis a defensive stock, a key quality for those prioritizing wealth preservation.
Growth via strategic investments
While Fortis is often celebrated for its stability, it is also a growth-oriented company. The utility giant is in the midst of a $25 billion five-year capital investment program aimed at modernizing its infrastructure, enhancing reliability and expanding its renewable energy initiatives. This ambitious plan supports earnings growth and aligns Fortis with the global transition toward cleaner energy sources.
Notably, Fortis is investing heavily in renewable energy and grid modernization projects. These initiatives position the company to benefit from the ongoing shift to sustainability, ensuring its relevance and competitiveness in the evolving energy landscape.
For investors with a long-term horizon, Fortis offers the opportunity to harness the power of compounding. Reinvesting dividends can significantly enhance total returns over time. Given Fortis’s consistent dividend increases, the compounding effect is amplified, making it a formidable wealth-building tool.
In addition, the disciplined approach of Fortis to capital allocation ensures it can continue rewarding shareholders without compromising its financial health. Its strong credit ratings and conservative payout ratio offer assurance of its ability to sustain and grow dividends.
