With the TSX sitting near its record high and economic turbulence potentially on the horizon, investors are wondering which stocks might be attractive to own right now inside a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
Fortis
Fortis (TSX:FTS) has increased its dividend for 52 consecutive years. That’s the kind of reliability investors want to see when searching for top income stocks.
Fortis owns and operates regulated natural gas and electricity utility businesses in 10 American states, five Canadian provinces, and the Cayman Islands. The assets include power generation facilities, electricity transmission networks, and natural gas distribution utilities.
Households and businesses need power and natural gas regardless of the state of the economy. As such, Fortis tends to deliver predictable and reliable cash flow throughout the economic cycle.
Growth has historically come from a combination of acquisitions and organic projects. Fortis hasn’t completed a major purchase for several years, but its capital program continues to expand. In fact, Fortis is currently working on a $28.8 billion investment plan that will boost the rate base from more than $42 billion in 2025 to nearly $58 billion in 2030.
As the new assets are completed and start to generate revenue, the boost to earnings should support planned dividend increases of 4% to 6% over the next five years. Investors who buy Fortis at the current share price can get a dividend yield of 3.3%. Each dividend increase will boost the yield on the initial investment.
Opportunity
It’s a good time to be a gas and electricity utility in the United States and Canada.
Power demand is expected to surge in the coming years as hundreds of new AI data centres are built by tech firms. These facilities consume significant amounts of electricity. Renewable energy will provide some of the power, but the bulk of the required electricity will come from new gas-fired power generation sites.
In Canada, the government intends to create a national power grid in the coming years. Fortis would be a strong candidate to participate in the construction and operation of parts of the project due to its expertise in this sector.
Risks
Utility companies use debt to fund their capital projects. This is why the share prices of Fortis and its peers took a hit in 2022 and 2023 when the Bank of Canada and the U.S. Federal Reserve aggressively raised interest rates to get inflation under control. The rate cuts that occurred in 2024 and 2025 helped drive the rebound.
Looking ahead, an uptick in inflation caused by high oil prices could force the central banks to raise rates again in late 2026 or 2027. If inflation spikes and the economy holds up, the central banks might need to boost rates multiple times. In that scenario, utility stocks would likely come under renewed pressure.
The bottom line
Fortis pays an attractive dividend that should continue to grow. Investors should be prepared for some near-term volatility if rate hikes resume, but this stock still deserves to be a core holding in any buy-and-hold dividend portfolio. Any pullback would be viewed as an opportunity to add to the position.