Key Takeaways
- Fortis and TC Energy are defensive Canadian utilities with essential, rate‑regulated assets that generate steady cash flow regardless of economic cycles.
- Both companies have long histories of annual dividend increases—Fortis for 52 years and TC Energy for 26 years—offering reliable income growth.
- Fortis is executing a $28.8 billion capital program that will lift its rate base from $42 bn (2025) to nearly $58 bn by 2030, supporting a target dividend rise of 4%‑6% per year.
- TC Energy’s extensive natural‑gas pipeline network and storage assets position it to benefit from rising North‑American LNG demand and upcoming cross‑border projects.
- Despite past headwinds (interest‑rate spikes and project financing needs), TC Energy strengthened its balance sheet through asset sales and completed key pipelines on time and on budget.
- Current yields are attractive: Fortis ≈ 3.3% and TC Energy ≈ 3.8%, making both suitable for a TFSA or RRSP focused on income and long‑term stability.
Introduction: Why Defensive Dividend Stocks Matter Now
With the TSX flirting with record highs and macro‑economic headwinds looming, many investors are looking for shelters that can preserve capital while delivering consistent income. Utilities that own indispensable infrastructure—electricity, natural gas, and related services—tend to experience less volatility because demand for their products remains relatively inelastic across economic cycles. In this environment, Fortis Inc. (TSX: FTS) and TC Energy Corp. (TSX: TRP) stand out as two Canadian names that combine essential‑service exposure with strong dividend track records, making them worthy candidates for a self‑directed TFSA or RRSP portfolio aimed at both income and long‑term growth.
Fortis: Business Model and Core Assets
Fortis owns and operates a diversified portfolio of natural‑gas distribution utilities, power‑generation facilities, and electricity transmission networks across Canada, the United States, and the Caribbean. The company’s assets are largely rate‑regulated, meaning that revenues are set by governmental agencies and provide predictable cash flow irrespective of broader market swings. Households and businesses continue to need electricity and natural gas even during recessions, which underpins Fortis’s reputation as a defensive holding. This regulatory framework also simplifies capital planning, as management can forecast returns on new investments with a higher degree of confidence than in unregulated sectors.
Regulated Revenue Stability and Growth Outlook
Because almost all of Fortis’s income stems from rate‑regulated businesses, the company can reliably fund its expansion programs while maintaining dividend discipline. Regulated utilities typically earn a permitted return on equity, which translates into steady earnings that support both operational needs and shareholder returns. This stability is especially valuable when investors anticipate economic slowdowns, as the utility’s cash flow is less likely to deteriorate sharply compared with cyclical industries. Moreover, the regulatory environment provides a clear pathway for recovering costs associated with large infrastructure projects, reducing execution risk.
Fortis’s $28.8 Billion Capital Program
Fortis is currently advancing a $28.8 billion capital initiative designed to raise its rate base from approximately $42 billion in 2025 to nearly $58 billion by 2030. As new assets—such as upgraded transmission lines, modernized generation plants, and expanded gas‑distribution networks—are completed and placed into service, the resulting increase in rate base should drive higher regulated earnings. Management has signaled that this incremental cash flow will enable the board to raise the dividend by 4% to 6% annually over the next five years. The program also leaves room for additional projects, including potential participation in a national power‑grid buildout aimed at doubling Canada’s electricity capacity to meet future demand and renewable‑integration goals.
Dividend History and Share‑Price Resilience
Fortis has increased its dividend every year for the past 52 consecutive years, a testament to its commitment to shareholder returns even through varying economic climates. This long streak provides investors with confidence that the stated dividend‑growth guidance is credible. Historically, Fortis’s share price has shown resilience after market corrections; the stock tends to rebound as investors flock back to its dependable income stream. Consequently, any short‑term pullback can be viewed as an opportunity to add to a position, particularly for those employing a dollar‑cost‑averaging strategy within a TFSA or RRSP. At the time of writing, Fortis offers a dividend yield of roughly 3.3%.
TC Energy: Core Infrastructure Footprint
TC Energy is best known for its vast natural‑gas pipeline system, encompassing more than 90,000 km of transportation lines and 650 billion cubic feet of storage capacity spread across Canada, the United States, and Mexico. Beyond pipelines, the company operates power‑generation assets, primarily gas‑fired cogeneration plants and nuclear facilities, which complement its midstream business. This integrated model allows TC Energy to capture value across the natural‑gas value chain—from production and processing to transportation, storage, and end‑use power generation.
Recent Challenges and Balance‑Sheet Strengthening
TC Energy faced a turbulent period after the pandemic when rising interest rates coincided with the need to finance the Coastal GasLink pipeline, a critical link delivering Canadian gas to the LNG Canada export terminal in British Columbia. To manage the heightened borrowing costs, the company pursued a disciplined asset‑sale program, divesting non‑core holdings to strengthen its balance sheet. The successful completion of Coastal GasLink—delivered on schedule and on budget—marked a major milestone, as did the finishing of a large natural‑gas pipeline project in Mexico that also came in under budget. These achievements demonstrated TC Energy’s ability to execute complex projects while maintaining financial prudence.
Growth Prospects Driven by LNG Demand
Global demand for North American natural gas is expected to climb as countries seek reliable supplies of liquefied natural gas (LNG) to diversify energy sources and reduce reliance on more volatile fuels. New LNG export facilities are under construction in Canada, with additional projects likely to follow as the nation aims to lessen its heavy dependence on the U.S. market. TC Energy’s deep expertise in building and operating large‑diameter gas pipelines positions it as a leading candidate to participate in these upcoming expansions. The company’s extensive storage network further enhances its ability to support LNG liquefaction and peak‑shaving services, adding another layer of recurring revenue potential.
Dividend Track Record and Current Yield
TC Energy has raised its dividend annually for the past 26 years, underscoring a durable commitment to returning cash to shareholders. This record, while shorter than Fortis’s, still reflects a consistent ability to generate sufficient free cash flow to support payout increases even amid capital‑intensive projects. Investors purchasing TRP stock at current levels can expect a dividend yield of approximately 3.8%, which is modestly higher than Fortis’s yield and reflects the market’s perception of slightly higher risk tied to the company’s larger exposure to commodity‑linked projects. Nonetheless, the combination of regulated‑like cash flows from its pipeline assets and growth opportunities in LNG makes the yield attractive for income‑focused accounts.
Comparative View: Fortis vs. TC Energy for a Defensive Portfolio
Both stocks share the defensive appeal of essential‑service businesses, yet they offer slightly different risk‑return profiles. Fortis’s nearly pure regulated utility model provides the most predictable earnings stream, making it a lower‑volatility choice ideal for investors who prioritize dividend stability above all else. TC Energy, while still benefiting from regulated pipeline tariffs, carries greater exposure to project execution and commodity‑linked power generation, which can translate into higher growth potential—especially as LNG demand rises—but also a modestly higher risk profile. For a TFSA or RRSP that seeks a blend of steady income and modest capital appreciation, holding both names can diversify sources of defensive return while capturing complementary growth drivers.
Conclusion: Actionable Insights for Income Investors
In summary, Fortis and TC Energy represent two of Canada’s most reliable dividend‑paying utilities, each backed by indispensable infrastructure that continues to generate cash regardless of economic cycles. Fortis’s extensive regulated asset base and ambitious $28.8 billion capital program support a clear path to 4%‑6% annual dividend growth, while TC Energy’s massive natural‑gas network and strategic positioning in the expanding LNG market offer both income and upside potential. With current yields of roughly 3.3% (Fortis) and 3.8% (TC Energy) and long histories of dividend increases, both stocks merit serious consideration for anyone looking to fortify a TFSA or RRSP portfolio against market turbulence while securing a growing stream of passive income.
The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.
2026