Fortis (TSX: FTS) has long been viewed as one of the best long-term investments to consider. And now, there’s one more reason for that belief to continue. Fortis announced a 4% dividend increase this week during its latest quarterly update.
This means that Fortis extends its dividend increase to 53 consecutive years, the second-longest of any stock in Canada. The company also extended that growth guidance through 2031.
That means a higher payout today and a longer outlook for further increases. But does this make Fortis worth adding to an income portfolio?
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53 consecutive years of increases
The latest increase has Fortis bumping the quarterly dividend to $0.67 per share. The first payment at that new rate will be December 1, with an ex-dividend date of November 17.
The new rate calls for an annual dividend of $2.66, and management calls for additional annual bumps of 4% to 6% through 2031.
The benefit for existing shareholders is additional income without buying more. Investors who opt to reinvest those payments can build their portfolio further and allow future increases to buy additional shares.
Additionally, the guidance on future increases helps set expectations. Investors with longer-term timelines may feel more comfortable knowing that additional increases are being planned for.
What supports further dividend growth through 2031?
Fortis operates regulated electric and gas utilities in Canada, the U.S. and the Caribbean. Fortis invests in infrastructure needed to deliver energy, with regulators determining the rates they can charge and the returns they are allowed to earn.
This means that Fortis generates a recurring and stable revenue stream that leaves room for growth investment and for that quarterly dividend.
Fortis’s new five-year capital plan totals $32.2 billion. That’s an increase of $3.4 billion from the previous plan. The company expects the investments to support compound annual rate-base growth of 7.5% through 2031.
That includes spending on transmission projects at ITC and infrastructure at FortisBC.
The rate base is the value of Fortis’ utility assets on which regulators allow a return. Its growth gives Fortis a path to higher earnings, but rate-base growth doesn’t automatically translate into the same growth in earnings per share.
In the most recent quarter, Fortis reported adjusted earnings of $0.92 per share, up from the $0.87 per share reported in the same period last year.
Is Fortis worth buying for income?
As of the time of writing, Fortis offers a yield of 3.1%. That’s not the highest yield on the market, but it can provide investors looking to build an income stream a great starting point.
The fact that Fortis has over half a century of annual increases to that dividend behind it makes it an even more appealing investment. That’s because a rising payout can help offset higher expenses in future years, while also rewarding patience.
In short, Fortis provides a necessary service, generates reliable income and continues to record annual upticks to its dividend.
In my opinion, Fortis is a great long-term option to hold in a well-diversified portfolio.
