Fortis (TSX: FTS) is down $5 per share from its 2026 high. Investors who missed the big rally over the past two years are wondering if FTS stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
Fortis (TSX: FTS) trades near $78 per share at the time of writing compared to $83 a few weeks ago. The drop brings the 2026 gain back down to about 10%. Fortis is still up more than 30%, however, in the past two years.
The recent dip could be due to rotation out of utilities and pipelines, which have done well for the past two years, and into other sectors that have also pulled back from the highs of the year.
Inflationary winds
Another reason could be concerns that sticky inflation will lead to new interest rate hikes in Canada and the United States. Fortis and other companies with capital-intensive growth projects tend to use a lot of debt to help fund development programs. Rising borrowing expenses can put pressure on profits while reducing cash that is available for distribution to shareholders or debt reduction. If borrowing costs jump too high, companies could be forced to delay or cancel planned growth projects.
There is precedent to justify the concern. Fortis saw its share price drop from $64 in April to $50 in October 2022, the year when the central banks aggressively raised interest rates to get inflation under control. If inflation moves higher in Canada and the U.S. over the coming months, without the economy falling off a cliff, the Bank of Canada and the U.S. Federal Reserve could start raising rates again in early 2027. Small increases spread out wouldn’t be as problematic as the big hikes over a short timeframe that occurred in 2022 and 2023, but they would still be a headwind for the utility sector.
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Upside
Investors should see any material pullback in Fortis as an opportunity to buy the stock. Fortis is working on a $28.8 billion capital program that is expected to raise the rate base from $42 billion to nearly $58 billion over five years. As the new assets are completed and go into service, the increase in earnings and cash flow should support the company’s plan to raise the dividend by 4% to 6% per year through 2030. The board has increased the dividend in each of the past 52 years.
Fortis has a number of other growth projects under consideration in both Canada and the United States that could extend the timeline. In addition, with its expertise in building and operating electricity transmission networks, Fortis would be a good candidate to participate in the expansion of the Canadian power grid, envisioned by the government in line with the current goal of making Canada an energy superpower.
Net earnings for the first half of 2026 came in $14 million higher than the same period last year. On the growth front, Fortis says it is on track to invest $5.6 billion in capital projects in 2026.
The bottom line
Investors should brace for more volatility if bond markets continue to signal anticipated rate hikes. That being said, buying Fortis on meaningful pullbacks has historically proven to be a smart move for patient investors. If you have some cash to put to work in a dividend portfolio, this stock deserves to be on your radar.
