Fortis (TSX:FTS)(NYSE:FTS) is a top Canadian dividend stock, but it hasn't been doing well this year, up a modest 6% thus far. And it's been falling since reporting its latest earnings numbers back in late July, when it was trading at more than $82. On Tuesday, it closed at less than $76.
While the company reported solid earnings growth in its second-quarter results, with net income rising from $384 million in the previous year to $396 million, concerns about rising interest rates may be weighing on the asset-heavy business. Despite being a fairly solid utility company with a highly dependable dividend, which currently yields 3.4%, the stock has been sinking in recent months.
It has been steady of late, but investors haven't seen a reason to load up on the stock. At 22 times earnings, its valuation may be a bit rich for the limited growth that the business offers, especially when there are many more enticing growth opportunities available in the market these days.
There's nothing wrong with the business itself, but investors are clearly seeing better opportunities elsewhere. For long-term investors, however, Fortis could still make for a compelling buy, given not only its high dividend but also the likelihood of future dividend increases, as the company has raised its payout for an impressive 52 consecutive years. It's expecting to continue to increase its dividend between 4% to 6% through to 2030.
For buy-and-hold investors, Fortis can be a great pick up right now, as its valuation has come down a bit and with a terrific dividend, it can generate a lot of recurring income.
