A dividend increase is like a small pay raise you didn’t have to negotiate with your boss. You receive more income from shares you already own. For new buyers, the share price decides what that raise is worth. I’d look for a utility that can keep growing the payment, with enough earnings improvement to make each increase sustainable.
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Give the raise a foundation
Utilities earn by providing essential services through expensive networks. Under regulation, approved infrastructure can generate permitted returns through customer rates. That gives spending a route to future earnings, but the money goes out before all those earnings arrive. A large construction plan only helps shareholders if the company can finance it sensibly and recover the costs.
Fortis (TSX: FTS) owns regulated electricity and gas utilities across North America. On November 3, it raised its quarterly common dividend from $0.64 to $0.67, an increase of about 4%. The new payment begins December 1 for shareholders of record November 17. It’s a concrete income improvement, arriving alongside a fresh five-year investment outlook.
More assets, more earning potential
The new 2027 to 2031 capital plan totals $32.2 billion. Management expects the regulated asset base to grow and extended dividend-growth guidance of 4% to 6% through 2031. The connection is straightforward. Useful new infrastructure expands the base on which utilities can earn, helping support larger shareholder payments as projects enter service.
I’d put the financing beside the growth target. Fortis expects to rely mainly on operating cash and utility debt, with much of its common-equity support coming through dividend reinvestment. That approach can finance expansion, while additional shares spread the earnings across more owners. The outcome I want is a growing payment per share, not simply a larger company.
For income today, the annualized dividend is $2.66. Against the recent close of $82.95, it yields about 3.2%. That’s a modest starting payment compared with many pipelines and property investments. The attraction is the possibility of gradual growth, which makes Fortis more suitable for an investor building future income than one trying to maximize next month’s cash.
Put the payment in dollars
A $10,000 budget buys 120 whole shares at that price, before fees. Using the newly declared rate for four future quarters, the income looks like this.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| FTS | $82.95 | 120 | $2.66 | $319.20 | Quarterly | $9,954.00 |
That leaves $46 in cash and pays $79.80 each quarter at the new rate. The monthly equivalent is $26.60, which is useful when comparing investments, although Fortis doesn’t send a payment every month. Reinvesting those quarterly dividends can add more ownership before you eventually switch the account towards spending income.
At 5% annual dividend growth, the middle of management’s guidance range, the holding’s annual income would rise from $319.20 to roughly $407 after five increases. That calculation keeps the share count unchanged. Reinvestment would add another source of income growth, with the number of shares purchased depending on future prices and the payment actually declared.
The main risks are financing costs and regulatory recovery. More expensive borrowing can reduce the profit left from a new asset, while regulators can delay or limit how costs reach customer bills. I’d also avoid paying any price for the word dependable. A utility can run well while its stock falls as investors find more attractive yields elsewhere.
Bottom line
For someone building Canadian dividend income, I’d buy Fortis gradually and hold it alongside other sectors. For more immediate income, I’d choose a covered, higher-yielding payment. The long-term portfolio benefits from matching the investment’s pace to the investor’s actual spending needs.
I’d buy a modest Fortis position for growing income and keep reinvesting while that income isn’t needed. The larger asset plan provides a route to future increases, while gradual purchases limit the importance of one day’s price. Give the business time to turn completed infrastructure into earnings, and those small raises could become a much more useful annual payment.
