Fortis Inc.: A Pillar of Stability in Turbulent Times

In an era of economic uncertainty and persistently high interest rates, income-focused investors are increasingly seeking refuge in defensive stocks—those with predictable cash flows, strong balance sheets, and a track record of consistent dividends. Among these, Fortis Inc. (FTS.TO) stands out as a paragon of reliability. With a 51-year streak of annual dividend increases, a disciplined payout ratio, and a diversified utility footprint, Fortis offers a compelling case for investors seeking both income and capital preservation.

The Fortis Dividend: A Model of Consistency and Growth

Fortis's dividend story is one of prudence and resilience. Over the past decade, the company has steadily increased its quarterly payouts while maintaining a payout ratio of around 48%, well within sustainable limits. As of July 2025, Fortis trades with a 3.75% dividend yield, significantly outpacing the average yield of its North American utility peers (~2.5%). This premium reflects investor confidence in Fortis's ability to grow its dividend even in challenging environments.

The company's 2025 quarterly dividend of $0.615 per share (announced July 31, 2025) marks a 9.7% increase from 2023, demonstrating its commitment to rewarding shareholders. Crucially, this growth is underpinned by a robust earnings base. With $1.6 billion in 2024 net earnings and a five-year capital plan of $26 billion, Fortis has the financial muscle to sustain its dividend trajectory. The board has also signaled its intent to grow dividends at 4-6% annually through 2029, aligning with its long-term rate base expansion.

Diversified Operations: The Secret to Resilience

Fortis's defensive appeal is amplified by its geographically diversified utility operations. The company serves over 2.5 million customers across Canada, the U.S., and the Caribbean, with regulated subsidiaries like Newfoundland Power, Maritime Electric, and Central Hudson. This spread mitigates regional economic risks and ensures stable cash flows. For instance, its U.S. operations in states like New York and Pennsylvania benefit from growing energy demand, while its Canadian assets leverage favorable regulatory frameworks and renewable energy investments.

The company's exposure to emerging markets, such as the Caribbean, adds another layer of diversification. Fortis Turks and Caicos and Caribbean Utilities, for example, have seen steady demand growth despite global volatility. This broad footprint allows Fortis to hedge against localized downturns, making it a rare utility with both North American stability and international growth potential.

Tax-Advantaged Dividends: A Canadian Investor's Edge

For Canadian investors, Fortis's dividends offer an additional advantage: they are designated as “eligible dividends” under the Income Tax Act. This classification allows shareholders to claim a higher dividend tax credit, effectively boosting after-tax returns. In 2025, the tax savings from this structure could be particularly meaningful, as high interest rates push investors toward income-generating assets.

Fortis also enhances shareholder value through its Dividend Reinvestment Plan (DRIP), which lets investors reinvest dividends at a 2% discount to the market price. This compounding mechanism, combined with the tax efficiency of eligible dividends, makes Fortis an attractive long-term holding for those prioritizing income growth.

Why Fortis Belongs in Every Income Investor's Portfolio

In a high-interest-rate environment, income stocks with low volatility and predictable cash flows become critical. Fortis checks all the boxes:
1. Defensive Business Model: Regulated utilities are less sensitive to economic cycles, ensuring consistent revenue.
2. Financial Prudence: A payout ratio of 48% and $5.2 billion in 2024 capital expenditures signal strong balance sheet health.
3. Global Diversification: A mix of North American and international operations buffers against regional shocks.
4. Tax Efficiency: Eligible dividends and the DRIP plan optimize after-tax returns for Canadian investors.

Final Thoughts: A Core Holding for the Long Term

While high interest rates have traditionally pressured utility valuations, Fortis's combination of a high yield, disciplined growth, and tax advantages positions it as a standout defensive play. For investors seeking a core holding that balances income with capital preservation, Fortis Inc. is a rare gem. Its 51-year dividend growth streak and 2029 guidance suggest this reliability is far from a historical anomaly—it's a strategic commitment.

As the energy transition accelerates and global markets remain volatile, Fortis's role as a stable, income-producing asset will only grow in value. For those with a long-term horizon, the time to consider Fortis is now.