Monday, March 26, 2012

Fortis Inc 2

I own this stock (TSX-FTS). I first bought this stock in 1987. I bought more in 1995 and 1998. I sold some in 2005, as I had relatively too much of this stock for my portfolio. This stock is currently at 5.6% of my total portfolio. My total return on this stock is 13.3% per year. The portion of my return attributable to dividends is 4.85% per year. That is some 36.4% of the return is attributable to dividend income.

When I look at insider trading, there was a minor purchase by a Director near the end of last year. Everyone but directors have more options than shares. However, there are other option type vehicles that insiders have, such as Performance Share Units for CEO and Deferred Share Units for Directors. Still, the CEO has some $10.7M in common shares and the CFO has some $3M in common shares. (See my site for information on Insider Trading.)

There are some 153 institutions that hold 32% of the shares of this company. Over that past 3 months 3 more institutions bought shares, and there were more buyers than sellers. However, overall, institutions hold almost 3% few shares at the end of this period than at the beginning.

I get 5 year median low and high Price/Earnings ratios of 15.9 and 20.20. The current P/E of 18.54 is just north of the 5 year median ratio of 18.47. This shows a reasonable stock price. I get a Graham Price of $28.43. The current stock price of $32.44 is higher by 14%. The 10 year median low difference between the Graham Price and the stock price is the stock price being 5.5% lower. The 10 year median high difference between the Graham Price and stock price is the stock price being 20.8% higher. This shows the stock price towards a high price.

I get a 10 year median Price/Book Value Ratio of 1.66. The current P/B Ratio is 1.58 which is 5% lower. This shows the stock at a good price. I get a current Dividend Yield of 3.7% and the 5 year median Dividend Yield is 3.3%, which is some 12% lower. This also shows a good stock price.

There are some mixed results in my tests, but most of the tests show a reasonable stock price. However, the stock passes the most important test on dividend yield and so it would seem to me that the current price is reasonable.

When I look at analysts’ recommendations, I find Strong Buy, Hold, Underperform and Sell. The consensus recommendation would be a Hold. (This is where most recommendations are.) One Hold gives a 12 months stock price of $35 and another at $34.44. Fortis is to purchase CH Energy Group Inc. (NYSE-CHG) and some analysts look on this as a positive.

One Hold reviewer says that the CH Energy acquisition was at a reasonable price, but another says they are paying too much. See a G&M article about this acquisition. See article in Class Action Central which says the price is too low. And a lawsuit has been filed about the too low price. See article in SBWire.

Another Hold says that the price is too high considering that not much growth is expected in earnings in the near future. One Buy recommendation came with comments that it is a great defensive stock with increasing dividends. Another Buy said that the yield of 3.7% is a great one.

The G&M has an article called Can Fortis power its way through recent soft patch? It basically says that Fortis has produced great returns over the past 10 years, but doubts it can continue. They expect dividend increases to be low, like the latest one of 3.4%. This is a highly regulated company and Alberta Utilities commission has just lowered allowed ROE by 0.25%. The company faces reviews also from Newfoundland and British Columbia.

The blogger The Loonie Bin has this stock and wrote about it in December 2011. And the blogger Cash Money 101 has recently written about Utility Stocks, including Fortis.

This is a utility stock and is therefore is a conservative investor’s choice. It provides a good dividend with increases above the inflation rate.

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 and 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.

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