A bigger utility dividend can buy more groceries today. A faster-growing one can help with the groceries that cost more 10 years from now. Choosing between those jobs is more productive than declaring every familiar power company a retirement stock. I’d compare the payment, the earnings behind it, and the spending needed to grow. For new money held for years, I’d pay some starting income for a clearer growth path.
FTS
Fortis (TSX: FTS) owns regulated electricity and gas utilities across North America. Its customers pay for networks and service, with regulators setting the framework for recovering costs and earning returns. Investment in transmission and reliability can therefore expand earnings without requiring the company to invent a new product.
Its November 3 update introduced a $32.2 billion investment plan for 2027 to 2031 and extended annual dividend-growth guidance of 4% to 6% through 2031. The connection is that approved assets enter service, earn through customer rates, and support profit growth. The plan still needs financing, construction, and regulatory execution before all that potential becomes money for shareholders.
Fortis also raised its quarterly dividend to $0.665, or $2.66 annualized. I’d view the modest starting yield as the price of owning a business with a visible route to gradual increases. The danger is paying so much for that predictability that even successful execution produces a disappointing stock return.
Emera (TSX: EMA) owns regulated utilities including major operations in Florida and Atlantic Canada. Its investment plan also supports infrastructure growth, while customer needs provide recurring demand. The shareholder’s job is to distinguish growth in the company from growth attached to each share.
First-half adjusted earnings were $2.06 per share, slightly below $2.07 a year earlier. Additional shares helped finance the business while spreading earnings across more owners. That doesn’t erase the investment case, but it makes me less willing to assume every new project will translate quickly into a larger dividend.
The latest quarterly dividend is $0.74, annualizing to $2.96. First-half payments consumed about 71% of adjusted earnings for that period. I’d consider Emera for a larger starting payment, with financing costs, storm expenses, and customer-rate decisions setting the pace of future increases.
The same $10,000 decision
Using recent closes, here are alternative purchases before fees. Annual income assumes four quarters at the latest declared rate, including Fortis’s new payment.
Emera starts with about $104 more annual income. Its indicated yield is about 4.2%, against Fortis’s 3.2%. I’d give up that difference for Fortis’s clearer dividend-growth outlook if I were reinvesting for a decade. Someone spending the income now could reasonably prefer Emera.
What’s more, Fortis reports annualized total shareholder returns of 10.1% over five years and 10% over ten years through September 30, 2026. Those rates include dividends, so they aren’t amounts to which the current yield should be added.
At 10% compounded annually, $10,000 becomes approximately $25,937 after ten years. At a slower assumed 6%, it becomes about $17,908. The gap shows why price and future earnings deserve attention even for a familiar utility. Past returns provide context, while a retirement plan needs room for a less generous decade.
Bottom line
The Bank of Canada’s rate increase adds pressure to both businesses through borrowing costs and competition from interest-paying investments. I’d own either alongside other sectors and retain cash for near-term bills, rather than depending on share sales during a utility selloff.
Fortis gets my next purchase for growing dividend income, while Emera wins for a larger payment today. Held inside a Tax-Free Savings Account (TFSA) with enough room, reinvested dividends can add ownership as the utilities build. I’d let time and sensible entry prices do their part, giving future increases a chance to outgrow the smaller first cheque.
