Fortis
Fortis (TSX:FTS) is trading near $73 per share at the time of writing, up from $53 in June last year.
The recovery started roughly around the time the Bank of Canada started cutting interest rates. Fortis and other utilities took a hit in 2022 and 2023 when central banks in Canada and the United States raised interest rates in an effort to control inflation. Fortis uses debt to finance its growth projects, which cost billions of dollars and sometimes take years to complete. The rise in borrowing costs due to higher interest rates is squeezing profits and cutting cash that could be used to pay dividends or reduce debt. Higher financing costs may also force companies to delay or defer planned projects.
Now that interest rates are falling in both Canada and the United States, investors are returning to Fortis. If interest rate cuts continue next year, more upside potential could emerge. Even if interest rates remain at current levels, there should be good momentum for shareholders. Fortis is working on a $29 billion capital program that will increase its interest base at a compound annual rate of approximately 7% over five years. As the new assets are completed and put into service, the added cash flow should support planned annual dividend increases of 4% to 6% through 2030.
Fortis has increased its dividend every time for the past 52 years. The stock currently offers a dividend yield of 3.5%.
Enbridge
With a current market capitalization of nearly $149 billion, Enbridge (TSX:ENB) is one of the largest companies on the TSX. Being so large allows Enbridge to make major acquisitions that would only be possible for a handful of peers or private equity players. For example, Enbridge spent $14 billion to buy three U.S. natural gas companies in 2024. The deals made Enbridge the largest operator of natural gas facilities in North America, at a time when demand for natural gas is expected to rise. The assets complement existing natural gas transmission infrastructure and position Enbridge to benefit as gas-fired power generation facilities are built to supply electricity to AI data centers.
Enbridge has also expanded into energy exports in recent years, expanding its renewable energy division. The company purchased an oil export terminal in Texas and is a partner in the Woodfibre liquefied natural gas (LNG) export facility being built on the coast of British Columbia.
Enbridge is working on a $35 billion capital program that will help boost distributable cash flow in the coming years. This should allow for continued annual dividend increases of 3% to 5%. Enbridge has increased its dividend every year for the past thirty years. Investors who buy ENB shares at the current price can get a dividend yield of 5.5%.
The bottom line
Fortis and Enbridge pay attractive dividends that are expected to continue to grow. If you’ve got some money to put to work, these stocks deserve to be on your radar.
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