After witnessing solid buying on Friday, the Canadian equity markets gave away some of their gains on Monday, with the S&P/TSX Composite Index falling 0.58%. With inflation in the United States still running above the Federal Reserve’s target, investors are concerned that the central bank may refrain from implementing aggressive rate cuts, leading to yesterday’s pullback. Also, concerns over the impact of protectionist policies on global economic growth persist. To navigate this uncertain outlook, you should consider adding the following two Canadian stocks to reinforce your portfolio.
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Fortis
Fortis (TSX:FTS) operates 10 regulated utility assets, serving 3.5 million customers across Canada, the United States, and the Caribbean. With 99% of its assets regulated and 93% involved in the low-risk transmission and distribution of natural gas and electricity, its financials are less prone to economic cycles. Supported by its reliable financials, the company has delivered an average total shareholders’ return of 10.2% for the last 20 years. Besides, it has uninterruptedly raised its dividend for 51 years, with its forward dividend yield currently at 3.5%.
Moreover, energy demand is rising amid population growth, rising income levels, and the rapid expansion of data centres to support the increasing usage of artificial intelligence, thereby driving the demand for Fortis’s services. Besides, the company is growing its asset base through its $26 billion capital investment plan, with $2.9 billion already invested in the first two quarters of this year. These investments could grow its rate base at an annualized rate of 6.5% to $53 billion by 2029. Along with these expansions, favourable customer rate revisions could boost its financials in the coming years. The company’s management is also hopeful of raising its dividend at a 4–6% CAGR (compound annual growth rate) through 2029. Considering all these factors, I believe Fortis is a safer bet in this uncertain environment.
Enbridge
Enbridge (TSX:ENB) is involved in transporting oil and natural gas, operates a natural gas utility business, and produces renewable energy. It has adopted a tolling framework and long-term take-or-pay contracts to move oil and natural gas across North America. It also sells the power produced from its renewable facilities through long-term PPAs (power purchase agreements). Additionally, less than 1% of the company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is susceptible to commodity price fluctuations, and around 80% of its adjusted EBITDA is inflation-indexed.
Therefore, the company’s financials have been stable and reliable, thereby delivering consistent returns for its shareholders. Over the last 20 years, the Calgary-based diversified energy company has delivered an average total shareholders’ return of 11.9%. Also, the company has been paying dividends for the previous 70 years and has raised its dividend at a 9% CAGR (compound annual growth rate) since 1995. Its forward dividend yield currently stands at a healthy 5.7%.
Moreover, Enbridge has identified around $50 billion of growth opportunities and expects to make a capital investment of $9–10 billion annually. These asset expansions could boost its financial growth in the coming years. Meanwhile, the company’s management projects its adjusted EBITDA to grow at an annualized rate of 5% for the rest of this decade, thereby allowing it to continue with its dividend growth. The company’s financial position has strengthened with its net debt-to-EBITDA improving from 5 at the end of 2024 to 4.7.
