Hurricanes of volatility can happen at any time, and it’s the risks that we don’t have on our lists that can do the most damage. Whether we’re talking about wars, pandemics, bubble bursts, or disruptive innovations that upend the economy, investors should always be ready to keep rolling with the punches. And in this environment, there’s certainly no shortage of volatility drivers.
While volatility can cause your portfolio to take a bit of a hit, it’s vital not to make too much of it, especially if you consider yourself a long-term investor and not a trader. If anything, long-term investors might wish not to check their portfolios or tune out (unless it’s to see if there are any buying opportunities) from the day-to-day swings.
In any case, having a bit of cash on the sidelines, or a stash of defensive dividend stocks to help you make it through turbulent periods, could be a good backup plan for investors who may be a bit too heavy on the risk-on trade. If you’re heavy in U.S. tech and have seen your portfolio fall further than the broad S&P 500 on a year-to-date basis (or worse, the Nasdaq 100), perhaps it’s time to batten down the hatches with the steadier part of your portfolio.
Of course, if you’re comfortable with tech, AI, and a spike in the VIX, the best move might be to add to your favourite titans in the weakness. At the end of the day, your portfolio build is tailored to you, and nobody else.
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Fortis: Steadiness for more volatility ahead
So, if you have a strong stomach and know what to expect when markets aren’t moving higher in a steady fashion, don’t be frightened out of a trade or follow the herd out of a group of stocks that might have nothing fundamentally wrong with them. For new investors who want to get paid cash dividends to wait for things to settle down, though, there are perfectly good dividend stocks worth rotating into. And Fortis (TSX: FTS) stands out as a great name to watch, as it stands behind the curtain of the AI trade as an essential power transmission play.
Of course, utilities are more like bond proxies than anything else, and while the past two years have been quite rewarding, with 44% in gains in the books, I still think shares of FTS are slightly on the undervalued side, especially considering the perfect balance of steadiness, dividends, and modest long-term growth. Each and every year, you can expect a mid-single-digit dividend hike from the firm as it executes on its growth plans.
Even after the current multi-year investment plan is done, expect management to find new ways to power a steady amount of growth for income investors. With a near-guaranteed single-digit raise (to the payout) every single year, FTS stock is one of those steady pillars to keep buying, especially if you’re too weighted to one side of the “barbell” with the risk-on tech names.
Shares aren’t a steal, but they’re not expensive, either!
The 3.2% dividend yield is on the lower end, and the valuation is on the higher end, but if you want steady sailing, perhaps the current multiple is fair, especially if you’re looking to play the future of the grid in the AI era. I say the name is worth the premium.
