3 Utility Stocks That Could Help Set You Up for Life
Written by Daniel Da Costa at The Motley Fool Canada
If you're looking to build long-term wealth with as little stress as possible, utility stocks are unquestionably some of the best investments you can make.
They may not be flashy or fast-moving, but that's exactly what makes them so attractive for long-term investors.
Utility companies provide essential services such as electricity, natural gas, or water and that consistent demand gives them some of the most stable and predictable revenue streams in the market.
Because of that stability, utility stocks are ideal for conservative investors or anyone focused on generating reliable, long-term returns. They tend to hold up well during economic downturns, they often pay steady and consistently growing dividends, and many are backed by regulated frameworks that reduce volatility and help mitigate risk even further.
Therefore, because these stocks have predictable revenue and are consistently investing in future growth, they aren't just defensive stocks. In fact, the best utility stocks still offer solid growth potential over the long haul.
These stocks increase earnings every year, which consequently allows them to increase their dividend payments, allowing the share price to follow suit.
And when you combine that long-term upside with steady income and recession resistance, utility stocks become one of the best core stocks for your portfolio.
So, if you're looking to boost your income or shore up your portfolio, here are three of the best utility stocks to buy now.
If you're looking for a solid utility stock to buy now, there's no question that Emera (TSX:EMA) and Fortis (TSX:FTS) are two of the best in Canada.
Both stocks provide both electricity and gas services to their millions of customers, and each company has diversified operations all over North America. This diversification is crucial because it takes an already low-risk industry and helps to reduce risk even more.
However, while both Fortis and Emera have many similarities, the main difference between the two stocks today is their dividends. Currently, Fortis is expecting to increase its dividend between 4% and 6% annually through 2029, while Emera expects to increase its dividend by 1% to 2% annually over the next few years as it works to shore up its balance sheet and reduce its payout ratio.
However, while Fortis offers more dividend growth potential over the coming years, it has a lower yield today. Right now, Fortis is offering investors a yield of roughly 3.8%, compared to Emera's current yield of 4.7%.
Fortis also has a much longer track record of consistent dividend increases. While Emera's 18-year streak is impressive, Fortis has increased its dividend every year for half a century.
So, although they are both two of the top utility stocks you can buy on the TSX, the slight edge still goes to Fortis unless you're looking for a higher-yield stock with the same level of reliability.
In addition to Fortis and Emera, another top utility stock to consider adding to your portfolio today is AltaGas (TSX:ALA).
AltaGas is one of the more unique utility stocks in Canada, offering a mix of traditional utility operations and high-potential energy infrastructure. It owns regulated natural gas utilities in the U.S., but it also has a large midstream energy segment focused on natural gas processing, exports, and storage.
This diversified model makes AltaGas a reliable investment while also giving it the potential to grow faster than a regular utility stock.
Its utility business provides steady cash flow and earnings visibility, while the midstream business offers upside tied to global demand for North American energy, particularly the growing Asian market, where AltaGas exports energy through its Ridley Island terminal.
Furthermore, in recent years, AltaGas sold off a ton of non-core assets and strengthened its balance sheet significantly, which is why it's now one of the best utility stocks to buy and hold for the long haul.
Finally, not only does it offer a yield of 3.3%, but AltaGas keeps that dividend sustainable by targeting a payout ratio of roughly 60%.
So, if you're looking for a high-quality utility stock to buy now and hold for years, AltaGas is certainly one you'll want to consider.
The post 3 Utility Stocks That Could Help Set You Up for Life appeared first on The Motley Fool Canada.
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Beginner Investors: 4 Top Canadian Stocks to Buy for 2025
5 Years From Now, You'll Probably Wish You Grabbed These Stocks
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Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Emera and Fortis. The Motley Fool has a disclosure policy.
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