The Utilities Play: Boring, Reliable, and Suddenly Profitable

Utilities rarely generate excitement, but that’s precisely their appeal. In a market often driven by hype and short-term speculation, these businesses could quietly deliver something far more valuable: consistency. For long-term investors, utilities can offer reliable income, steady growth, and an often overlooked ability to become surprisingly profitable through the power of compounding.  

Stability that compounds over time

At their core, utility companies provide essential services — electricity, gas, and water — that households and businesses depend on regardless of economic conditions. This makes their revenues highly predictable. Many utilities operate under regulated frameworks, allowing them to earn stable returns while passing certain costs, including inflation, onto customers. 

For investors, this translates into dependable cash flow and dividends that can be reinvested over time. While the gains may seem modest at first, the compounding effect can be powerful. By consistently adding shares — especially during market dips — investors can build positions that grow steadily in both income and value. What appears “boring” in the short term can turn into meaningful wealth over a decade or more.

Fortis: A quiet compounder

Fortis (TSX:FTS) is a good example of this investment style. At first glance, it’s a typical regulated utility. But beneath that surface lies a disciplined growth engine. Over the past decade, Fortis has delivered a compound annual growth rate (CAGR) of 10.8% — an impressive result for a low-risk, defensive stock. 

The company’s strength comes from its asset base. Its operations provide essential transmission and distribution services to 3.5 million customers across North America. This regulated model underpins predictable earnings and supports long-term capital investment.  

Looking ahead, Fortis has a $28.8 billion capital plan spanning 2026 to 2030. This investment is expected to drive rate base growth of about 7% annually, which in turn supports projected dividend increases of 4–6% per year. Notably, Fortis has already raised its dividend for over 50 consecutive years — a track record that underscores its commitment to shareholders.  

Importantly, the capital plan emphasizes lower-risk projects and geographic diversification, with the majority of investments in the United States and Canada. By 2030, Fortis expects its rate base to reach nearly $58 billion, with additional growth opportunities extending through 2035.  

Valuation matters

Even the best businesses can become less attractive if purchased at the wrong price. Currently, at $77.51 per share at writing, Fortis trades at a premium to its historical valuation, with a price-to-earnings (P/E) ratio of around 21.8 and a dividend yield of nearly 3.3%, which is below its 10-year average of about 3.7%. This suggests the stock may be slightly expensive at present levels. 

For disciplined investors, patience is key. Utilities tend to experience periodic pullbacks alongside broader market corrections. These moments often provide more attractive entry points, improving both yield and long-term return potential. Rather than chasing the stock, a measured approach — buying incrementally over time — can enhance overall results.

Investor takeaway

Utilities may lack excitement, but they excel where it counts: reliability, income, and long-term growth. Companies like Fortis demonstrate how steady earnings, disciplined investment, and consistent dividend increases can create meaningful wealth over time. While current valuations may warrant caution, the broader case for utilities remains strong. For investors willing to embrace patience and compounding, this “boring” sector can quietly become a powerful driver of portfolio success.    

The post The Utilities Play: Boring, Reliable, and Suddenly Profitable appeared first on The Motley Fool Canada.

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More reading

• 5 Dividend Stocks That Could Deserve a Spot in Nearly Any Portfolio
• Two Canadian Dividend Stocks Worth Snapping Up on Any Dip
• The Smartest Dividend Stocks to Buy With $250 Right Now
• Why This Boring, Reliable Utilities Stock Is Starting to Look Very Profitable
• Here’s Exactly How I’d Put $20,000 of TFSA Money to Work in 2026

Fool contributor Kay Ng has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.