Fortis Inc. (FTS): A Steady Hand in a Changing Climate – Evaluating Long-Term Growth and Shareholder Value Amid Low-Interest Rates

As the clock ticks toward Fortis Inc.'s (FTS) second-quarter 2025 earnings report—scheduled for August 1, 2025—investors are keenly watching a utility giant poised to navigate both macroeconomic headwinds and a structural shift in energy demand. With a $26 billion five-year capital plan, a 6.5% compound annual growth rate in rate base, and a dividend growth trajectory of 4–6% through 2029, Fortis stands at the intersection of resilience and innovation. This article dissects the company's long-term potential, its ability to sustain shareholder value in a low-interest-rate environment, and the strategic pillars underpinning its appeal.

Fortis's Q1 2025 Performance: A Blueprint for Stability

Fortis delivered net earnings of $499 million in Q1 2025 ($1.00 per share), up from $459 million ($0.93 per share) in Q1 2024. The growth was driven by rate base expansion, favorable currency dynamics, and the resolution of regulatory filings like Central Hudson's 2024 general rate application. Despite headwinds from higher financing costs and lower wholesale margins in Arizona, the company's disciplined execution of its $5.2 billion annual capital plan—$1.4 billion in Q1 alone—underscores its commitment to infrastructure modernization.

The five-year capital plan, spanning $26 billion from 2025 to 2029, is designed to increase rate base from $39 billion in 2024 to $53 billion by 2029. This growth will fuel earnings and reinforce Fortis's dividend guidance, which has been raised for 51 consecutive years. With a robust balance sheet and stable credit ratings (Baa3 from Moody's, A (low) from DBRS), Fortis is uniquely positioned to fund its capital-intensive projects without diluting shareholder value.

Low-Interest-Rate Tailwinds: A Double-Edged Sword

The Federal Reserve's 50-basis-point rate cut in September 2024 has provided utilities with a rare reprieve. For capital-intensive firms like Fortis, lower borrowing costs mean reduced financing burdens for projects in grid modernization, renewable gas, and liquefied natural gas (LNG) infrastructure. The utility sector's outperformance in early 2025—4.31% in the Morningstar US Utilities Index—reflects this optimism.

However, the sector faces a paradox: while low rates reduce financing costs, they also compress dividend yields relative to 10-year Treasury yields. As of March 2025, utilities trade at a yield discount to Treasuries—the largest since 2008. This divergence could persist, though, as rising electricity demand from data centers, EVs, and manufacturing reshoring creates a floor for earnings. Fortis's focus on regulated utility operations, where returns are predictable and inflation-linked, offers a buffer against this volatility.

Strategic Pillars: Infrastructure, Innovation, and Sustainability

Fortis's capital plan is not just about scale—it's about relevance. Investments in transmission infrastructure in the U.S. and Canada are critical for integrating renewable energy and supporting load growth. The company's $500 million at-the-market equity program ensures flexibility, while its dividend reinvestment plan provides cost-effective capital. Regulatory wins, such as FortisBC's 2025–2027 rate framework, add stability to earnings and cash flows.

Sustainability is another growth lever. Fortis has reduced direct GHG emissions by 34% since 2019 and aims for net-zero by 2050. These targets align with regulatory trends and investor preferences, enhancing long-term viability. Meanwhile, grid resiliency and climate adaptation projects—such as the Wataynikaneyap Transmission Power Project—demonstrate Fortis's role in bridging energy equity gaps while securing its market position.

Risks and Realities

Despite its strengths, Fortis is not immune to challenges. Regulatory delays, supply chain constraints, and inflationary pressures could slow project execution. Additionally, while low rates lower financing costs, they may also embolden regulators to push back against rate hikes, squeezing margins. Fortis must balance capital deployment with operational efficiency to maintain its credit profile and growth trajectory.

Investment Implications: A Defensive Play with Growth Legs

Fortis offers a compelling mix of defensive characteristics and growth potential. Its 6.5% rate base CAGR, 4–6% dividend growth guidance, and exposure to decarbonization and grid modernization make it a standout in the utilities sector. The recent rate cut environment enhances its appeal, as lower financing costs amplify the returns on capital-intensive projects.

For investors seeking income and stability, Fortis's dividend yield—though currently at a discount to Treasuries—remains attractive in a high-rate world. The company's focus on capital allocation, regulatory engagement, and sustainability positions it to outperform as the energy transition accelerates.

Final Take: Fortis Inc. (FTS) is a utility that balances the old (reliable dividends, regulated cash flows) with the new (renewables, grid resilience). As the August 1 earnings report approaches, investors should watch for confirmation of its Q1 momentum and clarity on how it navigates the evolving interest rate landscape. For long-term holders, Fortis represents a rare combination of defensive resilience and growth-driven innovation—a recipe for compounding value in uncertain times.