The market has performed well this year, and investor focus has largely been on growth stocks. As impressive as that run has been, there are now growing concerns about inflation, tariffs, interest rates and even a recession. That uncertainty can turn investors toward picking a reliable Canadian dividend stock over a volatile growth pick.
Fortunately, there’s no shortage of options to choose from. One Canadian dividend stock I keep coming back to is Fortis (TSX: FTS).
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Meet Fortis
Fortis is one of the largest regulated utility stocks in North America. The company provides electric and natural gas service to nearly 3.5 million customers across Canada, the United States, and the Caribbean.
Fortis is 100% regulated. That makes it predictable, but not a very exciting investment. It’s not going to compare to the growth of a high-tech stock or even some other income producers.
But that’s not the reason Fortis is at the top of my list.
The essential nature of the services that Fortis provides isn’t disappearing when the economy sours. Homes and businesses need electricity. Natural gas is still needed for cooking and heating.
And unlike most parts of consumer spending, you can’t just trade down your utility service like you would reduce your grocery bill or cut your cell phone when times are tough.
In other words, Fortis offers investors an extremely powerful defensive moat. It’s not entirely immune to volatility, but the business is far removed from those market shifts.
If I were building a portfolio, that defensive appeal is why Fortis would be near the top of any list.
And that’s not even speaking to why Fortis is a top Canadian dividend stock to consider.
What makes Fortis a great Canadian dividend stock?
One of the main reasons that investors turn to Fortis is for the dividend that the company offers. There are other great picks on the market. But Fortis really is the Canadian dividend stock for investors to consider.
A main reason for that is dividend growth. Fortis has provided investors with annual upticks to that dividend for 52 consecutive years. That’s the second-longest dividend growth streak in Canada.
As of the time of writing, Fortis offers a quarterly dividend that carries a yield of 3.3%. That’s not the highest yield, but it’s stable and growing.
That works out to $0.64 per share. To put it another way, an investor who can drop $30,000 into Fortis will generate just over $1,000 each year. And investors who aren’t ready to draw on that income can reinvest that income, allowing any future income to continue compounding.
In fact, $1,000 in dividends will generate a baker’s dozen of new shares each year without adding another dollar.
That steady, growing dividend is far more appealing to me than chasing the highest yield.
There’s growth behind that defensive moat
One of the stereotypes of utility stocks is that they are slow or even no-growth stocks. Fortunately, in the case of Fortis, that’s not true. If anything, Fortis has taken an aggressive stance on growth.
The company has a capital plan with $28.8 billion that extends through 2030. Investments are expected to increase the rate base at a compound annual growth rate of nearly 7%.
Included in that spending are improvements to transmission infrastructure, grid upgrades, energy infrastructure, and battery storage.
Again, Fortis isn’t providing explosive growth. Instead, its predictable expansion will increase earnings over time.
Why I’d buy Fortis in any market
Fortis offers investors an interesting mix of defensive appeal and long-term growth. Throw in the second-longest dividend growth streak in Canada, and you have one of the best Canadian dividend stocks to own.
In my opinion, Fortis should be a core holding in any long-term portfolio.
