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Fortis (FTS) Rewards Shareholders With 6% Dividend Hike

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Fortis Inc. (FTS - Free Report) announced that the board of directors has approved a 6% increase in the quarterly dividend rate to 53.50 cents per share, which is in sync with the company's guidance of 6% average annual dividend growth through 2025. The new annualized dividend rate is $2.14 and the current dividend yield is 4.83%, better than the Zacks S&P 500 composite’s 1.4%.

Fortis’ management has been raising the dividend rate annually and it belongs to an exclusive group of companies that have raised dividend rate every year for the past 48 years. The new quarterly dividend will be payable on Dec 1, 2021 to shareholders of record at the close of business on Nov 17, 2021.

Can Fortis Sustain Dividend Hikes?

Historical dividend payment does not provide any assurance whether the company will be able to sustain the dividend in future. Fortis’ stable regulated operation, systematic capital investments, and management’s initiatives to strengthen the business will assist it to generate enough funds and continue with dividend payments.

Fortis makes planned capital investments to further strengthen its existing electric and gas infrastructure. For the 2021-2025 period, the company expects to make investments of $19.6 billion, which will support low-risk growth over the long term. Courtesy of steady investments, its rate base is expected to grow to $40.3 billion in 2025 from $30.5 billion in 2020. Fortis has nearly 99% regulated utility assets, which assure a steady income.

The company will further expand operations by adding clean power generation assets to its portfolio. Fortis aims to become coal-free by 2032 and cut carbon emission levels to 75% by 2035 from 2019 levels.

The company aims to strengthen transmission and distribution networks as well as serve customers effectively. It is supplying renewable natural gas to customers to assist them in lowering emissions and targets 15% of its natural gas supply to be renewable by 2030.

Utilities With Long Dividend History

Regulated and domestic-focused utility companies enjoy a stable demand for their services, generate steady earnings and ensure solid income for investors through the distribution of regular dividends. Amid the ongoing low-interest scenario, utility companies with regular dividend-paying capability are often considered as bond substitutes.

Utilities like California Water Service Group (CWT - Free Report) , MDU Resources (MDU - Free Report) , and NiSource (NI - Free Report) , among others, in the sector have a long history of distributing dividends to shareholders. These dividend-paying stocks help investors to ride out volatile markets when it is difficult to register capital gains.

Price Movement

In the past 12 months, the stock has gained 7.4%, outperforming the industry’s rally of 3.2%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank

The company currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.