Long-term income-focused investors such as myself typically look for two key traits with a dividend stock: (1) yield and (2) safety.
Fortis Inc. (TSX:FTS)(NYSE:FTS) is a great balance of the two. The company's dividend yield has declined somewhat since the beginning of the year, due to an impressive run up in the company's equity value of more than 7%, however the yield still sits pretty at 3.6%.
Where this dividend gem really shines is in the predictable annual dividend increases Fortis shareholders have seen every year since 1974. The company has been able to consistently raise its dividend each year on the order of approximately 6%, leading to amazing compound returns for investors who have put their hard-earned money to work in Fortis stock and left it there.
Fortis estimates that its strong pipeline of projects combined with its recent acquisitions that have bolstered the utility giant's position in key U.S. markets will allow the company to continue to increase dividends by 6% annually over the next five years. Fortis has committed to a number of long-term projects in renewable energies, which are expected to provide excellent returns and increased stability over time as our world disengages from fossil fuels.
This long-term outlook Fortis management takes with respect to its capital expenditure budget is complemented by its portfolio of existing utilities assets. Fortis' electricity and gas assets are largely regulated, with long-term power generation contracts allowing Fortis to continue to turn a stable and predictable profit, in a time where the utilities sector is getting hammered by rising interest rates and fluctuating prices for commodities such as electricity.
