Rattled investors should treat the November wave of choppy waters as a wake-up call of sorts. It’s not hard to imagine that many risk-taking young investors are overinvested in growth. But there’s an easy way to fix that as one seeks to decrease their portfolio’s overall beta. In any case, for Canadian investors, the defensive utilities with solid dividends (and dividend-growth prospects), I believe, are easy purchases when one fears that a recession or a market upset could linger in the new year. Though it’s impossible to tell what the future holds, it’s always nice to have a utility stock that can rally on those down days where every single one of your other holdings is down by some percentage points.
Sure, it won’t make all too much of a difference to the overall losses on those really bad days, but, at the very least, you’ll have a portion of the portfolio that can do more of the heavy lifting when the higher-beta names exhaust and move lower, perhaps much lower in the face of a correction. As always, there tend to be trade-offs when going heavier on the defensives.
For those who are all-in on the risk trades, though, I think picking up a few shares of your favourite utility stock can make sense, even if you’re in it more for the lower beta and less for the higher dividend yield. Either way, the dividend is a part of smoothing out the ride long term. And with dividend-growth prospects, the dividend will get more bountiful the longer one holds.
In this piece, we’ll weigh two of the steadiest utilities on the Canadian market: Fortis (TSX: FTS) and Hydro One (TSX: H).
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Fortis
As you may know, I’m a huge fan of Fortis, even in up markets, thanks in part to its single-digit growth plan and high dividend growth predictability and stability. Looking ahead, investors can expect the dividend to keep on growing as the predictable growth plan yields greater cash flows over time. With a 21.8 times trailing price-to-earnings (P/E), shares are going for a premium, but a slight one that I think is worth paying, seeing where we stand in the broad markets. Stocks are arguably getting expensive, and the blowing up of an AI bubble (what are the odds of that in the next three years?) is a serious risk that must be managed.
As Fortis grows in a low-risk manner, I view the 3.53%-yielder as an easy pick-up right here, as shares break out to new highs. AI data centres are driving electricity demand, and utilities, like Fortis, stand to cash in, as they supply power to ambitious new projects that will keep on going online. Through 2030, investors can expect 4-6% dividend growth, thanks in part to new power deals that will lead to a steadily growing cash flow stream.
Hydro One
Hydro One has quite elevated barriers to entry that protect its business’s cash flows in Ontario. And while there are major perks of operating in a monopolistic market, I question the value to be had at 25.5 times trailing P/E. The yield is also smaller at 2.43%, so I’d be more inclined to go with Fortis, whether you seek more yield or a lower price of admission.
With a slightly lower beta (0.31 vs. 0.40 for Fortis), Hydro One may be less correlated, but, at the end of the day, I think value and yield matter more, and that’s why I’d go with shares of FTS for December 2025. Either way, both of these sleep-easy stocks are nice to have in moderate to small doses (or large if you’re really worried about a market meltdown), depending on your own personal risk tolerance.
