Fortis Inc

I first bought this stock (TSX-FTS) in 1987. I bought more in 1995 and 1998. I sold some in 2005, as this stock was relatively too much for my portfolio. My total return on this stock is 13.4% per year. For the shares I bought in 1987, my total return is 13.5% per year. Dividend yield would be in the 4 to5% range over this period of time.

According to my spreadsheet, the total return over the past 5 years is around 10% per year, with dividends accounting for around 3.3% per year. Over the past 10 years, the total return has been around 18% per year, with dividends account for around 4.25% per year.

Dividend growth has been great on this stock even though the dividend yield has also been good. The 5 and 10 year dividend growth has been 13.8% and 9.3% per year, respectively. The 5 year median dividend yield is 3.7%. Payout ratios are also good, with the Payout Ratio for earnings at around 65% and the Payout Ratio for Cash Flow around 26%.

This has been a great investment for me. On the money I originally invested, I am currently earning a dividend yield of 16.2%. If you lower than for long term inflation of 3%, that still gives me a 13.2% dividend yield on my original investment 24 years ago. The recent dividend increases have been more meager at 7.7% and 3.6% being the last 2 dividend increases. Dividend increases on this stock have declined during market crisis before.

Revenues, earnings and cash flows are growing at reasonable, but unspectacular rate. Revenues, over the past 5 and 10 years have grown by 5.8% and 7% per year, respectively. Earnings, over the past 5 and 10 years have grown by 5.5% and 9% per year, respectively. Cash Flow, over the past 5 and 10 years has grown by 7% and 11.4% per year, respectively.

The best growth is probably in book value at 10% and 9.5% per year. The Return on Equity is also fine; ending 2010 at 9.8% and ROE has a 5 year median rate of 8.2%. This has also slowed down during the recent market crisis, but is again picking up.

The last thing to discuss is debt ratios. This is a utility and as such, you expect debt ratios that are not great. First, the Liquidity Ratio at 0.79 is low. However, they also have a good cash flow to make up for this. The Asset/Liability Ratio is also a bit low at 1.46. Ideally, you want to see is these ratios at 1.50, but this does not occur on utility stocks. Ratios lower than 1.00 implies that assets cannot cover liabilities.

The Leverage Ratio at 3.90 is high as is the Debt/Equity Ratio at 2.68. However, these are the sort of ratios you get for utilities, like Enbridge, Transalta, Emera, etc.

I note that My Own Advisor blogger has this stock. Also, blogger The Loonie Bin has this stock.

This has been a good investment for me. If you want to start a portfolio off slowly and with little risk, this may not be a bad place to start. Most utilities are considered to be low risk. See my blog on setting up a portfolio in the investment notes section of my website.

Fortis is a diversified, international distribution utility holding company. Its regulated holdings include electric distribution utilities in five Canadian provinces and three Caribbean countries and a natural gas utility in British Columbia. Fortis owns and operates non-regulated generation assets across Canada and in Belize and Upper New York State. It also owns hotels, commercial office, and retail space primarily in Atlantic Canada. Its web site is here Fortis. See my spreadsheet at 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.