Canadian savers are looking for good dividend stocks to add to their self-directed Tax-Free Savings Account (TFSA) portfolios focused on generating steady tax-free passive income.
Source: Getty Images
Fortis
Fortis (TSX: FTS) just announced its 53rd consecutive annual dividend increase. The stock is near its all-time high, reflecting the confidence the market has in the company’s ability to deliver growth in the coming years.
Fortis is a Canadian utility company with assets spread out across Canada, the United States, and the Caribbean. The company owns and operates power generation facilities, natural gas and electricity distribution utilities, and electricity transmission grids.
Fortis recently reported solid Q3 2026 financial results. Adjusted net earnings came in at $0.92 per share compared to $0.87 per share in the same quarter last year.
Fortis also provided an update to its five-year growth program. The company expects to invest $32.2 billion through 2031, delivering 7.5% compound annual growth in the rate base. The resulting boost to cash flow should support planned annual dividend increases of 4% to 6% through 2031.
Beyond this timeline, Fortis is evaluating a number of other projects across the asset portfolio that could get added to the capital program and would extend the dividend expansion past the next five years.
Canada’s plan to build a national power grid as part of the overall goal of becoming an energy superpower could open up new growth opportunities for Fortis. The company operates across the country and has expertise in building electric power networks.
The current capital program alone is expected to expand the rate base from roughly $45 billion in 2026 to nearly $64 billion by 2031.
Risks
Fortis surged in recent weeks after pulling back from the earlier highs. The main headwind for the stock would be much higher interest rates in Canada and the United States. Fortis uses debt to fund part of the growth program with projects that cost billions of dollars and can take years to complete. Higher borrowing expenses can reduce profits and cut into cash that is available to reduce debt or raise dividends.
Recent interest rate increases have been offset by the strength of the growth outlook. The last time the central banks aggressively increased interest rates the market punished utility stocks. Fortis, for example, fell from $64 to $50 per share in 2022 when rate hikes ramped up as the U.S. Federal Reserve and the Bank of Canada moved to get inflation under control. At this point, inflation isn’t as high, so the required rate increases might not be as severe, but investors should keep an eye on inflation reports in the coming months. High oil prices could filter through to price increases across the broader economy in 2027. If inflation spikes, the central banks will be forced to be more aggressive.
The bottom line
Near term-turbulence is expected, but Fortis should be attractive at the current price for a buy-and-hold income portfolio. Dips would be opportunities to add to the position. Steady dividend increases will boost the yield on the original investment, which is a key goal for income investors.
