Utility giant Fortis (TSX:FTS) is among the most boring (ahem, stable) stocks in the market. This company is certainly a far cry from many other high-growth names in more attractive sectors such as technology or AI. But it’s a company that has also quietly trucked along, providing market-beating returns in recent years.
I think there’s good reason for this trend, as the chart above shows. Here’s why I think this stock outperformance is more likely than not to continue in the years to come, and why Fortis remains one of the most solid buying opportunities in the market today in my view.
Resilient business model
We’re going to dive into Fortis’ core fundamentals and operating metrics here shortly. But first, I thought it would be important to dive into the company’s robust and resilient business model as a key driver of these underlying numbers.
Fortis remains a leading regulated electric and gas utility in North America, with a customer base that continues to grow in its core markets. The majority of the company’s revenue comes from the U.S. (roughly two-thirds), with around one-third coming from Canada and a small slice coming from other Caribbean nations.
As investors increasingly look for value-based opportunities in this market and companies that can withstand economic turmoil (should we see uncertainty rise again), Fortis is a stock I think could really step into the spotlight in such an environment.
What do the fundamentals say?
Ultimately, I think an investment in Fortis is one that really ought to center on the company’s fundamentals. That’s because Fortis has some of the best underlying numbers in the utility space I’ve come across.
Over the past year, Fortis has provided investors with an overall total return of roughly 25%. The company’s solid 3.8% dividend yield makes up a slice of this total return. But it’s this dividend that I think will continue to be a focal point for many investors seeking a reasonable and reliable dividend outlook over time.
The ability to provide investors with some amount of certainty in this regard comes from Fortis’ more than five-decade-long track record of raising its dividend distribution. And with revenue and earnings still on the rise, I think it’s reasonable to assume these increases won’t stop for decades to come.
Bottom line
In my view, Fortis provides investors with the right mix of defensiveness and value, alongside rock-solid fundamentals and a business model that will continue to churn out the sort of passive income that’s hard to come by right now. Fortis will very likely beat the market over the next 5 to 10 years – that’s a bet I’m considering making here.
