2 Canadian Utility Stocks With Stable Returns (and Dividends, too!)

Finding that perfect mix of income-producing stocks can mean the difference between retiring early to a juicy income, or needing to work into your golden years. Canadian utility stocks are great options to consider to accomplish that goal, for a variety of reasons.



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Here’s a look at two Canadian utility stocks you may want to consider buying for your portfolio (and future income stream!)

Let’s start with the (dividend) King

Canadian Utilities (TSX:CU) is a utility stock like no other. The utility has provided consecutive annual increases to its dividend for an incredible 51 years. This makes Canadian Utilities the only Dividend King in Canada.

Canadian Utilities is diversified across several segments and geographies. The company boasts transmission and distribution businesses, as well as production and storage operations across both electricity and natural gas verticals.

Those segments provide a reliable revenue stream for the company, which in turn translates into Canadian Utilities’ quarterly dividend. As of the time of writing, that dividend yield works out to a solid 5%.

Investors should keep in mind that Canadian Utilities is a long-term option that can provide a stable and growing income but not necessarily growth. Remember that prospective investors who are not ready to draw on that income yet can reinvest those dividends until needed, letting that future income grow further.

Given the current yield, a $30,000 investment in Canadian Utilities will generate a first-year income of approximately $1,500.

And consider this soon-to-be King

Fortis (TSX:FTS) is one of the largest utilities in North America. Fortis operates across 10 operating regions in the U.S., Canada, and the Caribbean.

Those segments are well-diversified, including both transmission and distribution segments that are overwhelmingly regulated by long-term contracts. Despite that stable business model, Fortis has taken an aggressive stance on expansion, which is a rarity for Canadian utility stocks.

In fact, Fortis has a whopping $22.3 billion capital investment plan to grow its rate base as well as transition some facilities over to renewables. And that’s not all; Fortis also offers a juicy quarterly dividend.

As of the time of writing, that dividend works out to a tasty 3.95%. Even better, long-term investors can take solace in the fact that Fortis has provided 49 consecutive years of increases. The company is also on track for a 50th increase later this year.

Fortis is also on track for 4-6% increases over the next several years. These increases only further the appeal of this must-buy stock.

Prospective investors with $30,000 to invest in Fortis can expect to generate an income of just under $1,200. And like any other investment, reinvesting those dividends until needed can provide additional growth over time.

Even Canadian utility stocks carry risk

Prospective investors should be reminded that no investment is without risk. Even the most defensive Canadian utility stocks carry some risk. Market volatility and rising interest rates over the past year have dragged down much of the market. That includes both Canadian Utilities and Fortis.

As of the time of writing, over the past 12-month period, both Fortis and Canadian Utilities have dropped by 7% and 8%, respectively.

Long-term investors should see this as an opportunity and not a weakness. Canadian utility stocks are superb long-term holdings that will not only recover but continue to provide a juicy growing dividend.

In my opinion, one or both stocks warrant a core position in any well-diversified long-term portfolio.

The post 2 Canadian Utility Stocks With Stable Returns (and Dividends, too!) appeared first on The Motley Fool Canada.

Before you consider Canadian Utilities, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in May 2023… and Canadian Utilities wasn’t on the list.

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See the 5 Stocks

* Returns as of 5/24/23

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Fool contributor Demetris Afxentiou has positions in Fortis. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.