It’s hard to believe that a steady Eddie utility play can be capable of delivering more than half a century’s worth of consecutive dividend hikes. When it comes to shares of Fortis (TSX: FTS), dividend growth investors have been rewarded for their patience as the firm raised the bar on its payout through the good times, the bad times, and the horrid times.
It’s the company’s ability to keep at it in times of panic (and recession) that makes the name such a dependable addition at the very core of any TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan).
Any way you look at it, Fortis is one of the names that can allow for a great night’s sleep, especially when the broad markets start to punish the high-flying names that many investors may have overweighted on the way up. With artificial intelligence (AI) stocks remaining under quite a bit of pressure, it should be no mystery as to why investors are more interested in diversifying away from the red-hot momentum plays and into the names that have delivered dividend raises for numerous decades.
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A predictable dividend grower worth holding for life
While it’s tough to tell where the market goes from here after a wobbly October month for the tech trade, I do think that those seeking relative safety and stability might wish to seek shelter in a name like Fortis. The high degree of regulation makes Fortis one of the few names that can keep on swimming ahead, even in the years when the economy contracts. With a fairly steady dividend guidance entailing mid-single-digit growth from here, Fortis is one of those bond proxy-like stocks that’s less likely to shock and awe.
Perhaps the best part of the steady, predictable dividend growth trajectory is that Fortis’ dividend can act as a terrific inflation fighter. Indeed, whenever inflation in Canada is running much hotter than 2%, you’re going to want income raises of at least 4–5%. As Fortis continues to execute on its predictable capital investment plan, my guess is that Fortis’ dividend could be one of the better inflation fighters out there.
Of course, the Bank of Canada is fighting back at lingering inflation with its latest interest rate hike. In any case, I do believe that Fortis’ growing 3.2%-yielding dividend is worth grabbing as shares continue to break out.
Fortis stock’s breaking out, and it might just be the start
After a 1.7% pop in Wednesday’s session, the steady utility play now finds itself up just north of 13% in the past month. I think the breakout is a long time coming and might be in its early innings, especially if the growth-to-value rotation has legs.
Fortis is far from a value play at around 24.2 times trailing price-to-earnings (P/E), but if you value stability and a subtle tailwind from the rise of artificial intelligence (the grid really does need to catch up if the data centre boom is to keep up), I’d not be afraid to pay a fair price for a company that might offer a level of predictability that’s tough to match. Between bonds and Fortis stock, I’d choose the latter any day of the week!
