Friday, May 24, 2013

Fortis Inc

I own this stock of Fortis Inc. (TSX-FTS, OTC- FRTSF). I first bought this stock in 1987 and them some more in 1995 and 1998. In 2005, I sold some because it was a too big a portion of my stock portfolio. I have a total return of 13.24% per year with 8.36% per year from capital gains and 4.88% per year from dividends.

The dividend growth over the past 5 and 10 years is at 7.9% and 9.8% per year. However, they are so good because of very good increases in dividends occurring between 2006 and 2008. Looking at my stock that I have had for the last 25 years, the dividend growth is at 5.25% per year. This is probably the more normal increase for this stock. The last dividend increase in 2013 was at 3.3%.

The 5 year median Dividend Payout Ratios are good with the DPR from earnings at 69% and from cash flow at 27%. Current DPRs are basically the same as are the DPRs expected over the next couple of years. (See my site for information on Dividend Payout Ratios).

The total return over the past 5 and 10 years is at 6.93% and 14.14% per year. The dividend portion of these returns is at 3.55% and 4.09% per year, respectively. The capital gain portion of these returns is at 3.37% and 10.06% per year, respectively.

Over the past 5 and 10 years shares outstanding has been increasing at the rate of 4.3% and 11.4% per year. Shares have increased due to share issues, stock options, DRIPs and conversion of debentures. Revenues are up 6% and 18% per year. Revenue per Share is up by 2% and 6% per year. However, if you look at 5 year running averages, Revenue per Share 8% and 7% per year. That is because exactly 5 years ago, Revenue grew by 84%, Revenue per Share by 24% and outstanding shares by 50%.

Earnings per Share is up by 4.7% and 5.5% per year over the past 5 and 10 years. Cash Flow per Share is up by 8% and 8% per year over the past 5 and 10 years. Book Value per Share is up by 4.5% and 8.8% per year. This stock has done quite well as usual. It is a solid performer.

The Return on Equity has never been very high on this stock with the ROE for 2012 at 6.9% and the 5 year median at 7.2%. The ROE on the comprehensive income is close with the ROE for 2012 at 6.8% and the 5 year median at 7.7%. This is a highly regulated company, so the company is not much in control of the ROE.

The Liquidity Ratio has never been very high and the current one is at 0.92. If you add in cash flow less dividends you get a better ratio of 1.46. This is a utility stock and utility stocks tend to be heavy in the debt department. They do rely on a steady stream of cash flow.

The Debt Ratio is good and always has been. The current Debt Ratio is 1.58, which is a bit better than the 5 year ratio of 1.53. However, any ratio of 1.50 and above is good. The current Leverage and Debt/Equity Ratios of 3.68 and 2.33 are fine for a utility company.

Fortis underperformed in the 1st quarter and revenues and cash flows were down. The earnings were up, but some of that was because of extraordinary items. Extraordinary items generally do not count as they are none repeatable.

I still have a fair chuck of my portfolio in this stock and I intend to keep what I have. I will not be buying more because there is only so much I want to one stock. However, this has been a great utility stock for me and it will continue to be a solid part of my portfolio. See my spreadsheet at fts.htm.

This is the first of two parts. Second part will be Monday and will be here.

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 Inc.

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 or StockTwits.

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