Utility companies provide essential services, including electricity, natural gas, water, and wastewater management, making them a dependable part of any investment portfolio. Because demand for these services remains steady regardless of economic conditions, utility companies typically generate stable earnings and cash flows across market cycles, offering investors reliable long-term returns.
That said, utility stocks generally do not deliver the same level of upside as high-growth companies. The sector is highly capital-intensive, requiring substantial investments to maintain and expand infrastructure. Moreover, regulated pricing limits how much utilities can charge customers, constraining profit margins and returns on equity.
With markets becoming increasingly volatile amid rising geopolitical and trade tensions and persistent inflation, investors may want to add defensive, high-quality utility stocks to their portfolios. The following two utility companies stand out for their resilient businesses, stable financial performance, and ability to deliver consistent returns across a wide range of macroeconomic conditions.
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Fortis
Fortis (TSX:FTS) operates nine regulated utilities across Canada, the United States, and the Caribbean, serving approximately 3.5 million customers. With most of its assets regulated and around 95% of its operations focused on low-risk transmission and distribution, Fortis’s financial performance is relatively resilient to economic cycles and macroeconomic fluctuations. This stability has helped the company deliver an average annualized shareholder return of approximately 10% over the past 20 years. Fortis has also delivered 52 consecutive years of dividend increases and currently offers a healthy dividend yield of 3.36%.
Looking ahead, demand for Fortis’s services could remain strong, supported by rising electricity and natural gas consumption from a growing customer base and the rapid expansion of AI-ready data centres. To capitalize on these opportunities, the utility is progressing with its $28.8 billion capital program, which could help grow its rate base at an annualized rate of 7% to $57.9 billion by 2030. At the same time, Fortis continues to focus on operational efficiency, disciplined capital allocation, and innovation to control costs and improve customer affordability.
Supported by these favourable growth prospects, management expects to increase its dividend by 4%–6% annually through the end of the decade. Meanwhile, Fortis shares have recently come under pressure, falling approximately 9% from their 52-week high. Given its resilient regulated business, impressive dividend-growth track record, attractive long-term growth outlook, and recent pullback, I believe Fortis could be an excellent addition to a portfolio amid the current uncertain market environment.
Hydro One
Hydro One (TSX:H) is a pure-play electricity transmission and distribution company with no exposure to power generation. Approximately 99% of its earnings come from rate-regulated assets, insulating its financial performance from commodity price volatility and broader macroeconomic fluctuations. This regulated business model provides Hydro One with stable, predictable cash flows that support attractive long-term shareholder returns. Over the past decade, the company has delivered a total return of approximately 185%, representing an annualized return of 11.1%. Hydro One has also increased its dividend at an annualized rate of 5.4% since 2017 and currently offers a forward yield of 2.64%.
Looking ahead, Hydro One is expanding its asset base to meet growing electricity demand across its service territory. The company currently has 15 transmission projects at various stages of development and construction. Meanwhile, population growth and ongoing residential development could further increase demand for electricity distribution services. These investments, combined with rising electricity consumption, could support the company’s earnings growth and create additional opportunities for long-term share-price appreciation.
Given its highly regulated business model, resilient earnings, consistent dividend growth, and visible long-term growth opportunities, Hydro One appears well positioned to deliver steady financial performance. With these strengths, the stock could be an attractive addition to a portfolio, particularly for investors seeking stability and dependable long-term returns amid an uncertain economic environment.
