Thursday, April 1, 2010

Fortis Inc

I would like today to talk about one of my favorite utility stocks (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 of Dividend Achievers and Dividend Aristocrats (see indices).

This stock is not perfect by any means, but it does have a good story to tell. The growth in Revenue, Earnings, Dividends, Book Value and Total Return are all very good. For example, the Book Value growth for the last 5 and 10 years is 14.5% and 12% per year, respectively. The dividend growth for the last 5 and 10 years is 14% and 8.7% per year, respective. These are very good growth figures.

However, when you look at the growth in cash flow, this has not been so great. These growth figures for the last 5 and 10 year are 5.5% and 8.7% per year. The 10 year growth figure is not bad, but the 5 year growth figure is a little low. The next thing that is not so good is the Liquidity Ratio and the Asset/Liabilities Ratio. The Liquidity ratio is just skating by on 1.00 and the Asset/Liabilities Ratio is just below 1.50. However, any analysts report I have seen rate this stock at a low risk level.

I guess the last things to mention are the Return on Equity and the Accrual Ratio. The average ROE for the last 5 year is 8%. The ROE for the year ending in 2009 is a little low at 7.4%. Also, the Accrual Ratio is a bit high at 5.6%, but this ratio is often high.

What you expect from a utility company is a solid 8% per year total return. Any that can produce a solid 13% per year is a good company. I have a fair bit of this stock, but I plan to hold on to what I have. After the holidays, I will talk about what the analysts say about this stock.

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 See my spreadsheet at .

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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