Investing in utility stocks can be an attractive option for investors seeking stability and consistent dividend income. Utility companies operate in a regulated environment, reducing revenue fluctuation risk, and their ability to adjust rates in response to inflation serves as a hedge against economic uncertainties. Here are two Canadian utility stocks that dividend investors might consider for worry-free income in December 2023.
Fortis (TSX: FTS):
Fortis stands out in the utility sector, owning a robust portfolio of regulated utility businesses. With a low-risk business model and a growing earnings base, Fortis has consistently increased dividend payments for 50 consecutive years. The company's $25 billion five-year capital plan aims to raise its rate base from $36.8 billion in 2023 to $49.4 billion by 2028, indicating a five-year compound annual growth rate (CAGR) of 6.2%. This growth in the rate base is expected to support dividend growth in the coming years. Despite energy price volatility and interest rate concerns, Fortis plans to increase its dividend by 4-6% annually through 2028, offering a current dividend yield of 4.3%.
Canadian Utilities (TSX: CU):
Canadian Utilities is another compelling stock in the utility sector, providing electricity transmission and distribution services and owning energy infrastructure assets. The company's highly contracted and regulated earnings base forms the foundation for consistent dividend growth. With a record of increasing dividends for 51 consecutive years, Canadian Utilities aims to align future dividend payments with sustainable earnings growth from regulated and long-term contracted assets. The company plans to invest $4.1 billion between 2023 and 2025 in regulated utility and energy infrastructure projects, driving earnings, cash flows, and enabling higher dividend payouts. Canadian Utilities offers a high dividend yield of 5.8%, making it an attractive choice for income-focused investors.
For dividend investors seeking stable income, Fortis and Canadian Utilities present compelling opportunities in the utility sector. Diversification is key to managing risk and earning consistent passive income. While both stocks have strong dividend growth track records, investors should conduct thorough research or seek professional advice before making investment decisions