You don’t need to find the next rocket ship to the moon to build wealth in the stock market.
In fact, trying to do that is often the fastest way for new investors to lose money. The real secret for sustainable, less-stressful investing is often found in the boring, predictable, and utterly essential companies that form the backbone of our economy.
This week, one stock in our watchlist perfectly embodies this principle: Fortis Inc. (FTS: $70.16).
Think of Fortis not as a flashy tech stock, but as the sturdy, reliable foundation of a house. You might not spend much time admiring the foundation, but everything else collapses without it. For your portfolio, Fortis can play that same crucial, stabilizing role. Let’s dive into exactly why, in plain English.
What Does Fortis Actually Do?
Fortis is a regulated utility company. This is a key term. It means they operate the electricity and natural gas grids that power homes and businesses across Canada, the United States, and the Caribbean. They are the company you pay on your monthly power bill.
This business model has several inherent advantages that make it a beginner’s dream to understand:
- Monopoly-Like Markets: In most areas, you can’t choose your electric company. Fortis has an exclusive license to provide service in its territories. This means no fierce competition driving prices down unsustainably.
- Predictable Demand: Do you use less electricity during a recession? Maybe a tiny bit. But you don’t shut off your fridge, heat, or lights. Demand for electricity and heat is incredibly stable, rain or shine, boom or bust.
- Government-Regulated Profits: This is the magic piece. Utility companies don’t get to charge whatever they want. A government commission allows them to charge rates that guarantee a fair and predictable profit to cover their costs and provide a return to their investors (like you, if you own the stock).
Imagine a business where you have a guaranteed customer base, selling a product they absolutely must buy, with a pre-approved profit margin. That’s the regulated utility model in a nutshell.
The Crown Jewel: The 50-Year Dividend Growth Streak
Now, let’s talk about the most famous thing about Fortis: its dividend. A dividend is a portion of a company’s profits paid out to shareholders, usually every quarter. It’s like getting a small "thank you" bonus for owning a piece of the company.
Fortis hasn’t just paid a dividend; it has increased its dividend every single year for the past 50 years. Let that sink in.
This streak has survived:
- The high inflation of the 1970s.
- The stock market crash of 1987.
- The dot-com bubble burst in 2000.
- The 2008-2009 Financial Crisis.
- The COVID-19 pandemic.
A company can only do this if it generates incredibly reliable, growing cash flow year after year. This track record makes Fortis a member of an elite group known as "Dividend Kings" or "Canadian Aristocrats."
For a new investor, this is huge. It means you can reasonably expect:
- Quarterly Income: Money hitting your investment account regularly.
- A Raise Every Year: That income stream grows, helping your money fight inflation.
- A Sign of Financial Health: A company that can consistently raise its dividend is fundamentally strong and well-managed.
Breaking Down the "Score of 3" - Why It's a Strong Pick Now
In our newsletter, we gave Fortis a "Score of 3" for Strong Potential. Here’s what that means on a practical level:
- Current Price ($70.16): The stock is not at a screaming-all-time-high, offering a reasonable entry point.
- Dividend Yield: At this price, the dividend yield is around 4.0%. This means if you invest $10,000, you’d receive about $400 per year in dividends, paid in quarterly installments. This is significantly higher than the average stock or a savings account.
- Safety in Volatility: When the stock market gets shaky—like on days with scary inflation news or geopolitical tension—investors often flee to safe havens. Utility stocks like Fortis are classic safe havens. They might not soar as high in a bull market, but they tend to fall much less in a downturn. This reduces the heartburn of watching your portfolio swing wildly.
The "But What About...?" - Risks in Simple Terms
No investment is perfect. Here are the understandable downsides:
- It’s Boring & Slow: You will not double your money in a year with Fortis. This is a wealth compounder, not a lottery ticket. The growth comes from steady dividend increases and modest stock price appreciation over years.
- Interest Rate Sensitivity: When interest rates offered by banks go up, the attractive 4% yield from Fortis looks less special. This can sometimes cause the stock price to stall or dip slightly. However, its long-term growth story usually wins out over time.
- Major Disasters: A huge, unprecedented hurricane that destroys infrastructure in its territory would be a costly event. However, regulation often allows for recovery of these costs over time.
How to Think About Adding Fortis to Your Portfolio
If you’re a new investor, here’s how to approach a stock like FTS:
- Think "Core Holding": This isn’t a trade; it’s a long-term holding. Allocate a portion of your portfolio (especially money you can’t afford to lose) to this type of steady anchor.
- Use Dollar-Cost Averaging (DCA): Instead of trying to buy all at once at the "perfect" price, consider setting up a plan to buy a little bit every month or quarter. This smooths out your purchase price over time.
- Reinvest Those Dividends (DRIP): Most brokerages allow you to automatically use your dividend payments to buy more shares of the stock. This is called a Dividend Reinvestment Plan (DRIP). It’s a powerful, automatic way to grow your share count without adding new cash.
The Bottom Line
Fortis (FTS) is the definition of a "sleep-well-at-night" stock. It won’t make for exciting cocktail party talk, but it will quietly work for you in the background, providing growing income and stability.
For a beginner, building a position in a company like this teaches crucial lessons: the power of dividends, the value of predictable businesses, and the importance of having a stable core in your portfolio. It’s the financial equivalent of eating your vegetables and getting a good night’s sleep—not glamorous, but essential for long-term health.
In a world chasing the next big thing, sometimes the best move is to invest in the things that will always be needed. And for the foreseeable future, we will always need the lights to turn on.
*Disclosure & Holding Period: This analysis is for educational purposes. Our recommended holding period for a core position like Fortis aligns with a long-term, multi-year outlook, though general watchlist ideas are considered on a 1-6 month horizon. Always do your own research or consult a financial advisor.*
