Tuesday, April 6, 2010

Fortis Inc 2

Today I would like to continue my blog about my favorite utility stocks of Fortis Inc. (TSX-FTS). I first bought this stock for my trading account in 1987. Since that time, I have made a total return of 13.5% per year. This has been a great stock. Over the past 5 years, I have made a return of 14% per year. They are, of course, on the dividend lists that I follow. The other thing to point out is that I have had this stock for some 23 years and I am making a return of 15.7% on my original investment.

I guess the first thing to talk about is the P/E ratio. This stock has a 5 year P/E low of 15 and a 5 year P/E high of 19.7. The current P/E, according to what earnings estimates I picked up is 17.6. This is about half way between these two ratios. The next thing to look at is the Price/Book Value ratio. The current ratio is 1.40 and the 10 year average is 1.61, so the current is only some 87% of the long term average. This points to a relatively good current price. The next thing is the yield. The 5 year average is 3.3% and the current yield is 3.7%. This also points to a relatively good current stock price. The last thing I want to look at is the Graham Price. I get a current Graham Price of $27.70. The stock price is $29.00, so there is a difference of 4.7%. This is not bad. So what does all this say? Basically, it is saying that the current stock price is reasonable, but it has been better.

I also have looked at the Insider Buying and Insider Selling reports and they show some more selling than buying. However, the amounts are so small, we really do not learn anything about what the insider feel about this stock. The best indicator of how insider feel is the recent dividend increase of 7.7%. This shows confidence in how the company will do in the near future.

When I look at analysts recommendations, I see Strong Buys to Hold ratings. (See my site for information on analyst ratings.) The analysts’ with the Hold recommendations seem to feel that the stock price will only rise to perhaps $30 in the next 12 months. The analysts’ with the Buy recommendations talk about how this company has consistently created shareholder value and also that this company has a long history of increasing their dividends yearly.

I planned to continue to hold the stock I own. I will not buy any more for the simple reason this stock holding is already a good percentage of my portfolio. The thing with stock prices is that they generally have a seasonality to them. They tend to be higher at this time of the year and lower in the fall.

Fortis is a diversified, international distribution utility holding company. This company provides gas and electricity to customers across Canada, through regulated holdings that include a natural gas utility in British Columbia, and electric utilities in 5 provinces in Canada, and 3 Caribbean countries. It owns non-regulated hydroelectric generation assets across Canada and in Belize and upper New York State. It also owns and operates hotels in eight Canadian provinces as well as commercial real estate in Atlantic Canada. Its web site is www.fortisinc.com/. See my spreadsheet at www.spbrunner.com/stocks/fts.htm .

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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