If you’ve ever looked for a safe and reliable defensive dividend stock, you probably know that Fortis (TSX: FTS) is one of the best and, unsurprisingly, one of the most popular among Canadians.
Since it provides essential services in a highly regulated industry, Fortis is also one of the most predictable and reliable stocks you can own.
And while shares of Fortis reached a 52-week high of $83.75 in late July, the stock has since pulled back roughly 10% and now trades around $75 per share.
Naturally, after a decline like that, investors may wonder whether the pullback is an excellent buying opportunity or a warning that Fortis had simply become too expensive.
So, after Fortis stock’s recent move, here’s what investors should consider before deciding whether to buy, sell, or continue holding it today.
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One of the most reliable dividend stocks in Canada
Fortis’s operations consist entirely of regulated utilities, which is one of the biggest reasons it’s such a reliable long-term investment.
In fact, the company serves approximately 3.5 million electricity and natural gas customers across North America and the Caribbean. And because Fortis provides essential services, demand is highly predictable.
Furthermore, much of its growth comes from investing in new infrastructure and then earning regulated returns on those investments.
That stability has been evident for years. Fortis stock has now increased its dividend every year for more than half a century while also earning a total return of roughly 158% over the last decade, or nearly 10% annually.
That’s pretty impressive for a stock that will almost certainly never blow you away with explosive growth in the near term.
And looking forward, from 2026 through 2030, Fortis plans to invest $28.8 billion across its operations and expects those investments to generate annualized rate base growth of roughly 7%.
Management also continues to target annual dividend growth of between 4% and 6% through 2030, which should continue to keep that 52-year streak alive.
Is Fortis stock a buy, sell, or hold?
There’s little question that Fortis remains one of the highest-quality dividend stocks in Canada. That’s why the most important factor when deciding whether to buy it today is its valuation.
At approximately $75, Fortis trades at roughly 20 times its expected earnings over the next 12 months and offers a dividend yield of approximately 3.4%.
That isn’t cheap for a utility expected to grow at a mid-single-digit pace. However, it’s considerably more reasonable than the valuation investors were paying near its July high, when the same earnings outlook would have valued the stock at more than 22 times forward earnings.
One factor that has likely weighed on Fortis recently is the rise in bond yields. As investors become more worried about inflation, they typically demand higher yields to own longer-term bonds.
That can weigh on Fortis because higher bond yields make lower-risk investments more attractive, often forcing dividend stocks to trade at lower valuations.
Furthermore, because Fortis regularly uses debt to fund its capital plan, those higher yields can eventually increase its interest expenses as it refinances existing debt or borrows more.
That doesn’t mean rising bond yields are a major long-term threat to Fortis’s business. However, after the stock traded at a premium valuation earlier this year, they give investors another reason to be less willing to pay that premium.
Nevertheless, Fortis remains one of the most reliable stocks on the TSX thanks to its fully regulated operations. And with the stock trading roughly 10% off its 52-week high today, investors could certainly make the case to add to their position.
While it may not be a screaming bargain, a reliable defensive stock like Fortis rarely offers that, and the pullback has given investors a much better entry point into one of Canada’s most reliable dividend-growth stocks.
So, if you’re looking to shore up your portfolio or just add a reliable dividend stock that lets you sleep at night, there’s no question that Fortis, with its predictable operations and decades of growth potential, is a stock you can buy with confidence today.
