Utility stocks aren’t supposed to be exciting, but every so often, the market underestimates just how much compounding power there is in boring, regulated cash flows. This year, a handful of Canadian names look cheap enough, and have enough visible growth, to quietly outpace the TSX.
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Fortis
One of my perennial long-term utility stock picks I continue to view as one of the best dividend stocks in the market right now is Fortis (TSX:FTS).
Fortis is doing exactly what you want from a core utility holding. That is, growing its rate base at a mid‑single‑digit clip while steadily lowering risk.
The company just reported adjusted earnings of $3.53 per share for 2025, up 7.6% from 2024, supported by regulated rate base expansion and operational improvements. Management has laid out a C$28.8 billion five‑year capital plan that underpins roughly 7% annual rate base growth, giving investors unusually clear visibility on future earnings. At the same time, Fortis has been quietly de‑risking its balance sheet, while maintaining solid investment‑grade credit ratings and an (funds from operations) FFO‑to‑debt profile that’s trending stronger.
Put it together, and you have a utility growing EPS around the mid‑single digits. This comes with a near‑3.5% yield and 50‑year‑plus dividend‑growth streak that has already beaten the broader Canadian market over 1, 5, 10, and 20 years. If investors rotate back into defensives as volatility returns, that combination of yield, growth, and downside protection gives Fortis a very real shot at beating the TSX again in 2026.
Hydro One
Hydro One (TSX:H) used to trade like a sleepy bond proxy, but the fundamentals now argue for better‑than‑“bond‑like” returns.
The company controls the backbone transmission and distribution network in Ontario, giving it a quasi‑monopoly position in a province that continues to attract people and businesses. Rate base growth is being driven by the need to replace aging infrastructure and invest in grid modernization, and management explicitly expects to fund this growth without issuing equity, which should support per‑share earnings power.
The regulatory framework is attractive. The Ontario Energy Board has approved a 60/40 debt‑to‑equity structure and an allowed return on equity of 9.4% through 2027, locking in healthy, predictable returns on capital for several years.
On top of that, Hydro One is leaning into ESG tailwinds, cutting Scope 1 emissions by roughly 24% from its 2018 baseline and targeting a 30% reduction by 2030. With a solid balance sheet, visible mid‑single‑digit earnings growth, and a growing dividend yield in the 2.3% range, investors are getting a durable total‑return profile that could easily edge out a more cyclical, earnings‑volatile TSX this year.
Canadian Utilities
Canadian Utilities (TSX:CU) is the stodgy Alberta‑based name investors love to ignore, which is exactly why the stock’s setup looks compelling today.
The stock trades at a modest mid‑teens price‑to‑earnings multiple with a nearly 4% dividend yield, supported by largely regulated operations in electricity and natural gas that throw off steady cash flow. It also carries one of the longest dividend‑growth track records in the country, on the cusp of becoming one of Canada’s true dividend aristocrats. To me, this signals the management team’s confidence in long‑term cash‑flow durability. With capital still flowing into grid modernization, transmission, and cleaner generation, Canadian Utilities has a visible pipeline of projects that should support low‑ to mid‑single‑digit earnings growth off an already inexpensive base.
For investors, that math is powerful. Start with a roughly 4% cash yield, layer on even 3% to 4% earnings per share (EPS) growth, and you’re suddenly in high‑single‑digit total‑return territory from a name that many still treat like a bond substitute. If rates drift lower or simply stabilize, there’s room for some multiple expansion on top of that. This provides Canadian Utilities a credible path to beating a more growth‑dependent, sentiment‑driven Canadian index in the year ahead.
