Fortis Inc

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.

For the stock I bought in 1987, but yield on the original purchase price is 25.8%. Over the past 5 and 10 years, dividends have grown at the rate of 11.6% and 9.5% per year. The latest increase was much lower at 3.4%. This last increase is close to the historical norm for this stock. There were very large increases between 2006 and 2008.

The Dividend Payout Rates are good with 5 year median at 67% for earnings and 27% for cash flow. The DPRs for 2011 was close to this at 67% for earnings and 24% for cash flow.

If you had held this stock over the past 5 and 10 years, this stock would probably have had total returns of 5.6% and 15% per year over the past 5 and 10 years. Dividends would probably contribute to this return by 3.3% and 4% per year respectively. The portion of the return attributable to dividends over these periods would have been 59% and 27% per year, respectively. As you can see, return over the past 5 years has not been great. Return on any stock tends to fluctuate. The last 5 years has not been kind to a lot of stocks.

The shares under this company have grown at the rate of just over 12% per year for the past 5 and 10 years. Revenue growth is good for the past 5 and 10 years at 21% and 20% per year. However, the revenue growth per share is lower at 7% and 6.5% per year over the past 5 and 10 years.

Earnings per share have grown moderately at 4.9% and 6.8% per year over the past 5 and 10 years. Cash flow growth has been better at 8.2% and 7.8% per year over the past 5 and 10 years. Growth in book value has been strong at 10.8% and 10.5% per year over the past 5 and 10 years. This company has not yet changed their bookkeeping rules to the new IFRS standard, so we do not know how this change will affect book value yet.

For this stock, Return on Equity is fine, but not great. The ROE for the year ending in 2011 was 9.2%. The 5 year median ROE was a bit lower at 8.2%. The ROE on comprehensive income for 2011 was better than the ROE on net income. It was 9.7% with a 5 year median value of 9.4%.

Utility companies tend to have large debts and this company is not an exception. This shows in the Liquidity, Leverage and Debt/Equity Ratios. The current Liquidity Ratio is just 0.85 and it a bit higher and better than the 5 year median of 0.71. The current Debt Ratio is fine at 1.53 and is a bit higher and better than the 5 year median ratio of 1.52. The current Leverage and Debt/Equity Ratios are ok at 3.50 and 2.29 and are better than the 5 year median ratios of 3.74 and 2.44.

This is a solid utility stock and would be good for conservative investors who want to receive a good dividend return and some capital gain. Expect long term gain to be 8% to 10% per year with dividends contributing around 4% per year. Expect good dividends and moderate increases for the dividend on this stock.

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.