Some investments are exciting. They promise explosive growth, game-changing technology, or a turnaround that could triple your money. They also keep you up at night.
Then there are investments like Fortis (TSX: FTS). Nobody writes thrilling stories about utility stocks, but if your goal is building a retirement fund you don’t have to constantly worry about, boring is exactly what you want.
Fortis has raised its dividend every single year for 52 years. That is not a typo. Five decades of annual increases, through recessions, rate hikes, and market crashes. For an RRSP you plan to hold for decades, that kind of consistency is about as close to a warm blanket as the stock market gets.
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Fortis
Fortis owns and operates roughly $80 billion in utility assets across Canada, the United States, and the Caribbean. That includes electricity generation, natural gas distribution, and transmission networks.
Nearly all of that revenue comes from rate-regulated operations. In plain English, regulators approve the rates Fortis can charge, and those rates are designed to cover costs and generate a reasonable return. That makes cash flow predictable in a way most businesses can only dream about.
People need electricity and natural gas regardless of what the economy is doing. That is why Fortis has been able to keep raising its dividend for half a century.
The numbers today
As of September 21, Fortis trades at $75.30, down from its 52-week high of $83.75. The annual dividend is $2.56 per share, which translates to a yield of roughly 3.4%.
That yield is not going to excite anyone chasing double-digit payouts. But the starting yield is only part of the story. The management has guided for dividend growth of 4% to 6% annually through 2030, supported by a $28.8 billion capital plan that will expand the rate base by about 7% per year over five years.
Sparingly, an investment of just $10,000 in Fortis 30 years ago would be worth a whopping $300,000 today, provided dividends are reinvested. That is the power of compounding when a company keeps raising its payout decade after decade.
Why it belongs in an RRSP
An RRSP is designed for the long haul. You contribute during your working years, the investments grow tax-deferred over time, and then you withdraw later when you are likely in a lower tax bracket.
A utility stock like Fortis fits that structure perfectly well. It is not volatile nor does not require monitoring. It just keeps sending cash and raising the payout while you get on with your life.
Of course, there are risks involved as well. Fortis carries debt in order to fund its capital program further, and rising interest rates are resulting in that debt becoming more expensive. The stock fell from $64 to $50 during the rate hikes of 2022 and 2023, before recovering. That kind of volatility is normal for utilities and should be expected.
But for an investor with 20 or 30 more years until retirement, those swings matter far less than the steady growth of the dividend itself.
Foolish takeaway
Fortis may never be the most exciting stock on the TSX. There are no indications that it will double in a year, nor is it expected to dominate any headlines.
But what it will do is keep paying you. Year after year, with modest increases that add up over decades. For an RRSP meant to fund your retirement, that quiet reliability is exactly what you need. It is not flashy, not thrilling, but it is a warm blanket.
