Fortis (TSX: FTS) is among the top utility companies in the market I continue to pound the table on. Indeed, those who have followed suit and continued to add shares of this yield-producing gem in recent years have been well rewarded.
The company’s stock chart above certainly looks impressive, and suggests this is a stock that could have among the best momentum on the TSX. Given the performance of the Canadian stock market, that’s saying something.
Here’s more on why I think Fortis is a top pick for investors to consider right now.
Source: Getty Images
A dividend model that’s flawless
I’ll get to Fortis’ underlying business model in a second, and that’s a key reason why this stock is worth considering.
However, I think the reality that Fortis remains one of the best dividend stocks on the market is rationale enough for most investors to consider adding exposure right now.
At first glance, the company’s 3.3% dividend yield may not be attractive enough to get many investors excited. However, those who have locked in yields in past years have been well-rewarded by a dividend growth strategy (annual increases in the 6% to 7% range), which has provided income growth over time that’s generally outpaced inflation.
I think this strategy will continue in the long term. Why? Well, Fortis has continued to raise its distribution for more than five decades straight, meaning this is a stock that’s now valued on the basis of future dividend growth as much as any other factor. And with a rock-solid balance sheet supporting further increases, that’s a thesis investors can take to the bank.
What about that business model?
Given the surging demand we’re seeing for electricity and natural gas (power plants and other use cases), Fortis’ ability to transact at the intersection of these two major growth areas in the economy has clearly benefited long-term investors.
The extremely durable cash flows created by these two key regulated utility business lines have allowed for the kind of dividend growth investors have seen in the past. And with millions of customers unlikely to go into arrears (and risk losing their heat and power), this is a stock that could ride strong structural and secular tailwinds higher for many years to come.
That’s my base case at the moment, and I’m sticking by it.
