Investing headlines are often dominated by the latest developments relating to popular high-growth stocks. The dullest stock in your portfolio, meanwhile, can go weeks without a mention or headline.
Is that necessarily a bad thing, though? I take solace in the fact that I don’t need to babysit or constantly monitor changes to the dullest stock in my portfolio. As long as the stock is doing what it needs to do, then I’m fine with it.
And that’s where the appeal of Canadian Utilities (TSX: CU) comes into play. Canadian Utilities is the type of quiet holding that every portfolio needs. Not only does it stay out of the headlines while doing its job, but it also pays a dividend that rewards shareholders for that patience.
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Canadian Utilities gives dull a purpose
Canadian Utilities is one of the larger utility stocks. The company operates a portfolio of electricity and natural gas infrastructure. Canadian Utilities has operations in Canada, Australia, and Puerto Rico.
The utility businesses are tasked with transmitting and distributing power and gas, earning regulated revenue in exchange for providing those services. That’s a huge and frequently dismissed advantage. Customers can put off big purchases when money gets tight, but electricity and heat can’t be traded down or eliminated.
This gives Canadian Utilities a huge defensive moat. The company doesn’t need a new product or offering to continue attracting consumers. Instead, it just needs to continue doing what it does every day.
If that makes it the dullest stock in your portfolio, that makes no difference.
Another misconception around utility stocks relates to that dull stereotype. Specifically, they lack the incentive to invest in growth because they are such stable investments.
That’s where Canadian Utilities sets itself apart. The company has outlined a $12 billion capital plan that runs through the end of the decade. That plan includes investments to expand its rate base that help to support the growth of Canadian Utilities’s dividend over the longer term.
A dividend that rewards patience
For a dividend investor, the payout is a large part of why Canadian Utilities attracts investors. The company has increased its dividend for an incredible 54 consecutive years.
That’s the longest streak of any company in Canada. It’s also a record that has survived different interest rate environments and market conditions, which adds additional long-term appeal to prospective investors.
As of the time of writing, Canadian Utilities offers a yield of 3.65%. This means that a $25,000 position in the company will generate an income of just over $900.
That’s not enough to retire on, but it is enough to generate more than a dozen new shares each year from reinvestments alone. Thanks to compounding, those new shares can help to build out a much larger income stream over the longer term.
Why the dullest stock in your portfolio earns its place
One of the main reasons why Canadian Utilities is such a great holding despite being the dullest stock in your portfolio is because it does what it needs to do. The company doesn’t promise big growth, nor does it have the highest yield.
What it does offer is a dividend with over half a century of increases, backed by a utility business that I don’t need to check daily.
