The market is full of great long-term options that are superb additions to any portfolio. That being said, one stock is a must-buy for long-term investors.
That stock is Fortis (TSX: FTS), and here are three key reasons why Fortis is a must-buy for long-term investors.
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Reason #1- Fortis is a top defensive pick
Fortis is a utility stock. In fact, Fortis is a huge utility stock. The company boasts operations located across Canada, the U.S., and the Caribbean.
The overwhelming majority of Fortis’ business is bound by long-term regulated contracts. Those contracts span decades in duration, providing a recurring and reliable source of revenue.
Due to the sheer necessity of utility services, Fortis’ 3.4 million customers cannot simply trade down service. This makes Fortis one of the most defensive picks on the market, and a must-buy for long-term investors.
That defensive appeal is a key reason why Fortis trades up nearly 10% year-to-date and over 20% over the trailing 12-month period.
Reason #2- Fortis is not like other utilities
Critics of utility stocks often refer to the stereotype that utilities are boring investments. This is because they are perceived to lack the funding or incentive to invest in growth, due in part to the dividends they offer.
In the case of Fortis, this couldn’t be further from the truth. If anything, Fortis has taken an aggressive stance towards expansion over the years.
That focus on growth is a key reason why Fortis has grown to become one of the largest utilities on the continent. At the source of that growth focus is Fortis’ capital plan.
Fortis announced a five-year $26 billion capital plan late last year, the largest ever by the utility. The plan puts a lens on growing both the transmission and distribution sides of the business, both of which are highly regulated.
Reason #3- The dividend
Perhaps the main reason why Fortis is a must-buy for long-term investors is the dividend it offers.
Fortis offers investors a tasty quarterly dividend that currently boasts a yield of 3.8%. This means that those investors who can drop $25,000 into Fortis (as part of a larger, well-diversified portfolio) can expect to earn an income of just over $930.
That’s not enough to retire on, but it is enough to generate over a dozen new shares each year through reinvestments.
Adding to that appeal is the fact that Fortis has provided annual upticks to that dividend for over 50 consecutive years without fail. This makes Fortis one of just two Canadian Dividend Kings.
Fortis plans to continue that annual cadence with 4–6% increases through 2029.
That fact alone makes Fortis a compelling, if not must-buy, for long-term investors to consider right now.
Fortis is a must-buy for long-term investors
No stock is without risk. Fortunately, Fortis offers a great mix of defensive appeal, growth potential, and long-term income generation.
In my opinion, Fortis is a must-buy for long-term investors that should be a core holding in any well-diversified portfolio.
Buy it, hold it, and watch your future income grow.
