As the calendar rolls over into April, many investors may be looking to rotate their portfolios into increasingly defensive stocks. Those with outsized exposure to higher growth companies may be looking to take some risk off the table. Accordingly, looking at top Canadian dividend stocks in this environment certainly makes sense, with Fortis (TSX:FTS) remaining one of the top options I think is worth considering in this current environment.
Let’s dive into why now, specifically, may be a good time for investors to consider this top Canadian utility giant.
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A dividend-growth record that’s unmatched
Fortis continues to be one of the top companies many investors look to for dividend growth specifically. I’m not talking about the company’s dividend yield per se, which is still attractive. Indeed, any company offering a dividend yield of 3.8% is one that’s at least worth looking at from its income potential today.
Rather, it’s Fortis’s track record of dividend increases that catches my eye. This is a company that’s now increased its quarterly distributions for 51 consecutive years. This puts the company in the Dividend King category, which is rarified air, particularly in the Canadian market.
Fortis’s most recent dividend increase included a 4.2% hike in November, which brought the company’s yield above 4% for a time — that is, until investors bought this most recent dividend announcement and took its share price higher.
Fortis is a company with an effective floor underneath its share price in the form of continued dividend increases. Given the stability of its underlying business model, investors are likely going to continue to bid up shares to maintain its yield right around where it is right now. So, for long-term investors seeking stability, this is a company worth considering.
A truly defensive business model
One of the reasons why I continue to think Fortis has this unspoken floor underneath its share price is the company’s underlying business model. As a leading Canadian regulated utility company, with 93% of its assets tied to electricity and natural gas distribution across Canada, the U.S. and the Caribbean, there’s an incredible amount of cash flow stability investors receive by putting their capital to work in this name.
Simply put, until Fortis’s broad customer base turns off all their lights and chooses not to run air conditioning in the summer and heat their homes in the winter, Fortis will get paid. This is one of those household expenses that comes before almost all else. Thus, so long as Fortis can see some modest population growth in its core markets and show the need to raise prices modestly over time to regulators, this is a company that will be able to generate consistent and stable earnings growth.
Most importantly, Fortis has shown not only the ability but the willingness to pass on any sort of incremental earnings growth to investors over time. That’s what makes this stock one that I think is worth considering right now, even after its recent run.
