Amid easing geopolitical tensions in the Middle East and the reopening of the Strait of Hormuz, Canadian equity markets have rebounded sharply from their March lows, with the S&P/TSX Composite Index gaining more than 12%. However, investors still face several risks, including persistent inflationary pressures, restrictive monetary policies, supply chain challenges, evolving trade dynamics, and rising public debt levels across many economies.
In such an environment, strengthening a portfolio with high-quality companies that generate stable cash flows, maintain resilient business models, pay reliable dividends, and possess clear long-term growth drivers can be a prudent strategy. Against this backdrop, Fortis (TSX: FTS) stands out as an attractive investment opportunity. Let’s examine the company’s business outlook, recent financial performance, growth prospects, dividend track record, and valuation to determine whether the stock is worth buying today.
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Fortis’s business outlook
Fortis operates nine regulated utilities serving approximately 3.5 million customers across Canada, the United States, and the Caribbean. Around 95% of its assets are concentrated in low-risk transmission and distribution businesses, making its earnings less vulnerable to economic cycles, commodity price fluctuations, and broader macroeconomic volatility. As a result, the company generates stable and predictable cash flows.
This resilience has translated into impressive long-term returns for shareholders. Over the past two decades, Fortis has delivered an average annual total shareholder return of 10.7%. The utility also boasts an exceptional dividend track record, having increased its dividend for 52 consecutive years, while currently offering an attractive forward yield of 3.2%.
Fortis continues to expand its regulated asset base to support future growth. The company invested $1.4 billion in capital projects during the first quarter and remains on track to place $5.6 billion of capital into service this year. Supported by rate-based growth and favourable earnings at Central Hudson, net income rose modestly by 0.4% year over year to $501 million. However, unfavourable wholesale market conditions, higher maintenance spending, costs associated with rate-base expansion, adverse currency movements, and business divestitures partially offset these gains.
Meanwhile, earnings per share declined 1% to $0.99 due to an increase in the weighted-average number of shares outstanding, primarily resulting from the company’s dividend reinvestment plan. Next, let’s examine Fortis’s long-term growth prospects.
Fortis’s growth prospects
Moreover, electricity demand is increasing due to economic expansion, the electrification of the transportation and industrial sectors, and the rapid growth of AI-driven data centres, creating a favourable long-term backdrop for Fortis. To capitalize on these trends, the company plans to invest $28.8 billion through 2030 to expand its regulated asset base. These investments could increase its rate base from $42.4 billion at the end of 2025 to $57.9 billion by 2030, representing an annualized growth rate of 7%.
In addition to rate-base expansion, Fortis should benefit from preventive maintenance initiatives, operational efficiency programs, and favourable regulatory outcomes, all of which could support earnings growth in the coming years. This financial strength could underpin continued dividend growth. Management currently anticipates increasing the company’s dividend by 4% to 6% annually through the end of the decade.
Investors’ takeaway
Over the last 12 months, Fortis has delivered an impressive total shareholder return of 27.7%. Despite this strong performance, the stock continues to trade at a reasonable forward price-to-earnings multiple of 21.6, suggesting that its valuation remains attractive relative to its growth prospects and defensive qualities. Supported by its resilient regulated business model, a visible growth pipeline, and a proven ability to increase dividends, Fortis appears well-positioned to generate steady, long-term returns, making it an attractive investment amid an uncertain economic environment.
