Motley Fool recommendation(from a Motley Fool article yesterday)
Utility stocks generally add stability to a stock portfolio. Therefore, it makes sense to allocate a good percentage of capital to utility stocks on an economic recovery that could have bumps along the way.
Investors might own Fortis (TSX:FTS)(NYSE:FTS) or Brookfield Infrastructure for top-notch quality utility exposure. Between the two, Fortis stock appears to be more undervalued today.
At $52.49 per share at writing, it yields 3.85%. The average 12-month analyst price target suggests Fortis stock has near-term upside potential of more than 13%.
As expected of a first-class regulated utility, Fortis displayed a super resilient business with year-to-date adjusted earnings per share falling only 2.6% year over year.
Fortis didn’t break a sweat from increasing its dividend by 5.8% this year. Moreover, it expanded its five-year capital plan (worth $19.6 billion), which will support its annual dividend-growth target of roughly 6% in that period.
In short, the recent dip in Fortis stock is a good entry point for low-risk investors who seek stable income and returns.