Investors looking to gain exposure to the rise of artificial intelligence have a number of great growth stocks to choose from. Whether you’re thinking about investing in the hardware (semiconductors, data centres, etc.) as the backbone of this revolution, the companies building the AI applications, or other related trends — plenty of sectors are benefiting from a continuous and consistent rise in demand stemming from this nascent technology.
That said, one of the top ways I’m thinking about playing this trend is via the utilities sector. Within this sector, Fortis (TSX:FTS) continues to be a top pick of mine.
Here’s why I think Fortis still looks like the ultimate defensive play right now, while also providing some impressive long-term growth potential.
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Power demand will grow or hold steady over the long term
Investors who believe that, over the long term, population growth and the rise of new technologies will require more energy output have benefited from owning a company like Fortis. Indeed, this consistent and stable demand growth has allowed Fortis to raise its dividend for more than five decades straight. That’s one of the longest streaks on the TSX, and the company’s dividend is one of the key stabilizers I think long-term investors can rely on as part of the investment thesis behind this excellent company.
The thing is, if AI spurs the kind of forward demand the market is pricing in, perhaps the dividend hikes and capital appreciation of the past may be understanding this company’s potential.
No doubt, the stock chart above indicates that market participants are moving in this direction. I’m of the view that the stability of Fortis’s underlying business model in providing electricity and natural gas to millions of residential and commercial customers provides the stability and dividend growth that investors want. However, increased demand courtesy of AI for these same inputs could amplify the trajectory meaningfully moving forward.
Is Fortis a buy right now?
I think investors looking to go on the defensive or the offensive have reason to consider Fortis here.
The company’s sub-4% dividend yield is still better than where Canadian government bonds trade. And with a strong growth profile moving forward, and a strong balance sheet, which could lead to additional acquisitions down the line, this is a company I think could have plenty of upside over the long term.
For those thinking about adding exposure to a top utility stock, Fortis remains one of my top picks in the North American group. Until something drastic changes, I’m going to continue to pound the table on this name.
