Fortis (TSX:FTS) and TC Energy (TSX:TRP) are moving higher after a rough ride over the past couple of years. Investors who missed the recent bounce are wondering if FTS stock or TRP stock is still undervalued and good to buy for a portfolio focused on dividends and total returns.

Fortis

Fortis is a utility company serving about 3.5 million electricity and natural gas customers spread out across Canada, the United States, and the Caribbean. The $68 billion in assets includes power-generation facilities, electricity transmission networks, and natural gas distribution utilities.

These assets deliver essential services that commercial and residential customers require regardless of the state of the economy. This should make Fortis a good stock to own through an economic downturn. The assets generate rate-regulated revenue, so cash flow tend to be predictable and reliable.

Fortis is working on a $25 billion capital program that is expected to boost the rate base from $37 billion in 2023 to more than $49 billion in 2028. As the new assets go into service, the jump in cash flow should support planned annual dividend increases of 4-6%. Fortis raised the dividend in each of the past 50 years.

Fortis trades near $56 per share at the time of writing. That's up from the 12-month low of around $50, but is still way off the $65 the stock reached in 2022. Anticipated interest rate cuts in Canada and the United States in the coming months could provide an extra tailwind for the stock.

At the current share price, investors can get a 4.2% dividend yield.

TC Energy

TC Energy operates more than 93,000 km of natural gas pipeline infrastructure and 650 billion cubic feet of natural gas storage in Canada, the United States, and Mexico. Oil pipelines and power-generation facilities round out the portfolio, although TC Energy is going to spin off the oil infrastructure as a separate company to unlock value for shareholders.

TC Energy also has a large capital program. The company reached mechanical completion on its $14.5 billion Coastal GasLink project last year. Capital investments are targeted at roughly $8 billion in 2024 and will run in the $6 billion to $7 billion annual range over the medium term. As with Fortis, the new assets will generate extra cash flow that should support steady dividend growth.

TC Energy trades near $57 per share at the time of writing. The stock is up from the 12-month low near $44 but is still down from the $74 it hit in 2022 before rate hikes drove up debt expenses. Soaring costs on the coastal GasLink project also helped put TC Energy in the penalty box.

Management is doing a good job of repairing the balance sheet through $8 billion in non-core assets sales, of which $5.3 billion occurred last year. The moves should position the company well to pursue the rest of the growth program. Falling interest rates will also help keep more cash in the business.

TC Energy raised the dividend in each of the past 24 years. Investors who buy the stock at the current price can get a dividend yield of 6.75%.

Is one a better pick?

Fortis and TC Energy pay solid dividends that should continue to grow. Both stocks still look cheap and deserve to be on your radar for an income portfolio.

I would probably make TC Energy the first choice for the higher yield. Dividend growth will likely be similar for the two companies over the next few years.

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