Utilities provide essential services such as electricity, water, and energy distribution, making their financial performance relatively resilient to economic downturns, market volatility, and commodity price swings. Supported by regulated and low-risk business models, these companies often generate stable cash flows and consistent returns, helping investors add stability to their portfolios during uncertain periods.
Amid ongoing geopolitical tensions in the Middle East and elevated oil prices, global equity markets have become increasingly volatile. In this environment, the following two utility stocks stand out as dependable options that can strengthen a portfolio while delivering steady, reliable passive income. Let’s take a closer look at their business models and long-term growth prospects.
Source: Getty Images
Fortis
Fortis (TSX:FTS) operates regulated electric and natural gas utility businesses that serve 3.5 million customers across the United States, Canada, and the Caribbean. Since most of its assets are tied to low-risk transmission and distribution operations, the company’s financial performance remains relatively insulated from economic cycles, market volatility, and commodity price fluctuations. Supported by an expanding rate base and ongoing operational improvements, Fortis has delivered an average annual shareholder return of 10.2% over the past 20 years. The company has also increased its dividend for 52 consecutive years and currently offers an attractive dividend yield of 3.33%.
Looking ahead, economic expansion and rising electricity demand could support stronger demand for Fortis’s services. To capitalize on these trends, the utility plans to invest $5.6 billion this year and approximately $28.8 billion through 2030. These investments could grow the company’s rate base at an annualized rate of 7%, reaching $57.9 billion by the end of the decade.
Meanwhile, management expects nearly 70% of these capital expenditures to be funded through internally generated cash flows and equity issuances, which should help limit any significant increase in debt levels. In addition, favourable rate revisions, preventive maintenance programs, operational innovation, and efficiency initiatives could further strengthen the company’s revenue and earnings growth. Supported by these growth drivers, Fortis expects to increase its dividend by 4–6% annually through 2030. After delivering a total shareholder return of 19.5% over the past 12 months, the stock appears well-positioned to maintain its uptrend in the coming quarters.
Hydro One
Hydro One (TSX:H) is another utility stock that appears well-positioned to outperform amid this uncertain outlook. As a pure-play electricity transmission and distribution company with no direct exposure to power generation, Hydro One benefits from a highly stable business model. In addition, with nearly 99% of its operations rate-regulated, the company’s financial performance remains largely insulated from commodity price fluctuations, enabling it to generate steady earnings across different economic and market environments.
Backed by this consistency, Hydro One has delivered an average annual shareholder return of 17.58% over the past five years. The company has also steadily rewarded shareholders through dividend increases, growing its payout at an annualized rate of 5.2% over the last eight years. Currently, the stock offers a healthy dividend yield of 2.41%.
Meanwhile, Hydro One continues to expand its asset base to address rising electricity demand and strengthen grid reliability. The company is progressing with its $11.8 billion capital investment plan, which could increase its rate base to $32.48 billion by the end of next year. In addition, Hydro One has recently applied to develop the Northeast Power Line and the Longwood to Lakeshore Transmission Line projects, representing an estimated investment of approximately $3 billion, with completion targeted by the end of this decade.
Given its regulated business model, predictable cash flows, and ongoing expansion initiatives, Hydro One appears well-positioned to continue delivering steady dividend growth and attractive long-term returns in the coming years.
