Passive Income: Is Fortis Stock Still a Buy for its Dividend?

When it comes to passive income, Fortis (TSX:FTS) has long been seen as a great option. It combines a highly defensive business model with decades of dividend reliability. It operates regulated electric and gas utilities across Canada, the U.S., and the Caribbean, which means its revenues come from essential services that people and businesses pay for regardless of the economy.

That stability allows it to generate predictable cash flow, invest in long-term infrastructure, and consistently raise its dividend. In fact, Fortis increased its payout for 52 consecutive years, one of the longest streaks in Canada. Its current dividend yield sits near 3.6% and forms a dependable base for long-term investors focused on income and compounding. But is it really the best investors can do?

Into FTS

Fortis stock is one of Canada’s largest utility companies, owning regulated electric and gas assets in multiple jurisdictions and generating very stable earnings. In its third quarter of 2025, Fortis reported net earnings that reflected solid growth across its utility segments, supported by rate base expansion and strategic capital projects. Plus, it increased its quarterly dividend by about 4.1%, with guidance for dividend growth of 4% to 6% annually through 2030.

Fortis’s fundamentals are strongest when viewed through the lens of regulated utility growth and capital investment. Its large five-year capital plan, close to $29 billion, is designed to grow its rate base by roughly 7% annually and support future earnings and dividend increases. This is critical for income investors who want not just yield today but rising income over time. On valuation, Fortis trades at 21 times earnings, reflecting its defensive qualities and growth prospects, though its yield is lower than some higher-risk income stocks.

While Fortis stock is a great choice for passive income, it isn’t automatically the “best” option for every investor. Its yield around 3.6% is respectable but not class-leading, and because utilities are growth-constrained by regulation, capital appreciation can be modest relative to more dynamic sectors. Investors seeking higher current income might prefer names with yields closer to 5% or higher, albeit with more risk. Compared with many other dividend stocks, Fortis stock’s strength is stability and predictability rather than high yield.

Consider EMA

Emera (TSX: EMA) is another established Canadian utility that looks compelling and could be a better option than Fortis stock for some income investors — particularly those prioritizing a higher yield and current income. Emera’s current dividend yield sits near 4.4%, notably higher than Fortis stock’s, and its most recent dividend increase reflects 19 consecutive years of growing payouts. This underscores its commitment to income growth.

Emera also reported strong third-quarter 2025 results, with about 9% improvement in adjusted earnings per share and a substantial five-year capital plan focused on rate base growth, supporting the dividend. The fundamentals of Emera show a utility with a balance of growth and income. Its earnings growth targets and capital investments are designed to deliver across economic cycles while keeping dividends attractive relative to many peers.

The company’s diversified portfolio offers a slightly more dynamic mix than Fortis stock’s heavier emphasis on traditional utility assets. For investors focused on higher current income and dividend yield, Emera’s higher payout and long record of increases can be appealing. However, yield comes with the need to closely monitor payout ratios and future earnings coverage.

Bottom line

When comparing the two, Emera may be a better fit for investors prioritizing yield today, while Fortis stock remains a stalwart for those who value ultra-defensive stability and decades of uninterrupted dividend growth. Choosing between them often comes down to your income requirements and risk tolerance. For instance, consider how much $7,000 can bring in from each stock.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTFTS$71.0598$2.51$245.98Quarterly$6,963.90EMA$66.45105$2.91$305.55Quarterly$6,977.25

Fortis offers a slightly lower yield with a legendary dividend history and a broad regulated footprint. Meanwhile, Emera provides a stronger current yield and solid growth plan that may better serve investors seeking higher ongoing distributions without departing from the utility sector. In the end, investors need to decide for themselves.

The post Passive Income: Is Fortis Stock Still a Buy for its Dividend? appeared first on The Motley Fool Canada.

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More reading

• These Dividend Growth Stocks Should Have Totally Impressive Total Returns
• Young Investors: 2 Excellent Starter Stocks for Your TFSA
• Invest $20,000 in 2 TSX Stocks for $880 in Passive Income
• 5 of the Best TSX Dividend Stocks to Buy Under $100
• 1 Marvellous Dividend Stock Down 5% to Buy and Hold Forever

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Emera and Fortis. The Motley Fool has a disclosure policy.