The market is full of great options that can provide a healthy yield and defensive appeal for investors. Near the top of that list are utility stocks. But what utility stock is best for investors?
There’s more than a few great options to consider. Today, let’s take a look at Fortis (TSX:FTS) and Emera (TSX:EMA) to determine which one is the better utility stock to own.
Fortis: The stable king
Fortis is one of the largest utilities in North America. The company offers a mix of diversified gas and electric utilities across 10 operating regions. Those regions cover parts of Canada, the U.S., and the Caribbean.
Most of Fortis’ earnings stem from regulated transmission and distribution – in other words, rates set by regulators bound by long-term contracts. This means that Fortis generates a predictable, recurring, and stable revenue stream.
That revenue stream allows the company to invest in growth and pay a quarterly dividend.
On the growth side, Fortis has a $29 billion multi-year capital plan that runs through the end of the decade. That plan seeks to expand and upgrade its network, while also transitioning some facilities over to renewables.
Turning to income, Fortis provides investors with a quarterly dividend that carries a yield of 3.4%. Even better, investors weighing which is the better utility stock should note Fortis’ exceptional dividend growth record.
Fortis has provided annual upticks to that dividend for over 50 consecutive years without fail. This makes Fortis one of just two companies in Canada with the distinction of being named a Dividend King.
For investors looking for that sleep-well-at-night appeal from a utility stock, that dividend track record, coupled with its defensive appeal and diversified base, makes it a hard-to-ignore option.
Emera: Bigger yields and more parts
Like Fortis, Emera is a major utility in North America that has both electric and gas utility assets. That similarity extends to Emera’s rate-regulated base, which provides a similar predictable earnings and dividend profile.
Emera’s assets are focused on operations in Florida, Atlantic Canada, and the Caribbean.
And like Fortis, the company continues to invest in grid upgrades, gas infrastructure, and generation projects. Those growth projects are funded from a $20 billion capital plan.
The company expects its rate base to grow by up to 8% annually, primarily from its Florida utility. While that can provide growth, it’s also less diversified geographically than Fortis in this regard.
Turning to dividends, Emera offers a 4.3% yield with an established streak of 17 consecutive years of increases. The company continues to plan for additional annual increases, albeit with a 1–2% growth target over the next several years.
Emera is an appealing pick as the better utility stock for those investors seeking higher yields and growth potential.
Which is the better utility stock for your portfolio?
The answer to that really depends on individual investor goals. Fortis offers one of the best dividend streaks on the market with stable, albeit lower growth. Emera, on the other hand, offers fewer years of dividend increases, but higher growth and yields.
Investors seeking a long-term position that is both stable and growing will appreciate Fortis for its anchor-like qualities.
Investors prioritizing growth within the utility sector may prefer Emera’s slightly higher yield and growth prospects.
In my opinion, either stock would do well as part of a larger, well‑diversified portfolio, but both make a strong case for investors searching for the better utility stock to own today.
