I own this stock of Fortis Inc. (TSX-FTS, OTC-FRTSF). I bought this stock as Newfoundland Light and Power Co. Ltd. shares in 1987. I bought more in 1995 and 1998. It was on Mike's site showing Dividend Paying Canadian Growth stocks. It was also on the Dividend Growth stock lists that I follow.
Did I notice anything on doing spreadsheet? I have done quite well over the longer term on this stock as has all shareholders. You can see from the chart below that the company has been pretty consistent when it comes to capital gains and dividends over the long term.
Dividends are good with low dividend growth. The current dividend is 4.00% with 5, 10 and historical median dividend yields at 3.34%, 3.38% and 3.64%. As you can see from the chart below, dividends have grown general around the 6% mark per year over the past 36 years.
The Dividend Payout Ratios for EPS for utilities is best around 70% and 80% ranges. If you look at 5 year averages over the long term they have been in the 60 and 70% ranges. It is the 5 year averages that are important. In 2017 the DPR for EPS was 70% and the 5 year coverage was 71%.
The Total Return is show below for years of 5 to 36. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
This stock has been fairly consistent in capital gains and dividends over a very long term of 36 years.
| Years | Div Gth | Tot Ret | Cap Gain | Div |
|---|---|---|---|---|
| 5 | 6.25% | 9.79% | 6.15% | 3.64% |
| 10 | 7.08% | 8.23% | 4.75% | 3.48% |
| 15 | 8.39% | 12.94% | 8.74% | 4.20% |
| 20 | 6.75% | 11.53% | 7.68% | 3.85% |
| 25 | 6.07% | 13.06% | 8.41% | 4.65% |
| 30 | 5.73% | 12.74% | 7.87% | 4.87% |
| 35 | 6.06% | 13.96% | 8.12% | 5.84% |
| 36 | 6.22% | 13.59% | 7.95% | 5.64% |
I should address the debt level of this company. Yes, it is high, but that is not untypical for this type of company. I look at a number of debt ratios. One is Long Term Debt/Market Cap Ratio. This is high, but nothing unusual for this company. The 10 year median ratio is 1.01. The current ratio is 1.07. When this ratio is over 1.00 it means that the long term debt is greater than the stock's market cap.
Yes, I hate it that calculating the Liquidity Ratio on this stock is more complicated than most stocks. The basic Liquidity Ratio is too low at 0.63. This means that current assets cannot cover current liabilities. What you need to do is add back in the current portion of long term debt and also the cash flow after dividends. This brings you to a 2017 ratio of 1.53. The 5 year median for this is 1.39. Not great but I give it a pass.
The Debt Ratios are better with a current ratio at 1.54 and 5 year median also of 1.54. The Leverage and Debt/Equity Ratios for 2017 are 2.86 and 1.86 respectively. The 5 year median ratios are 2.91 and 1.91. These are rather typical for this type of stock.
The 5 year low, median and high median Price/Earnings per Share Ratios are 17.69, 19.36 and 21.03. The corresponding 10 year ratios are 16.97, 18.61 and 20.50. The corresponding historical ratios are 13.19, 13.07 and 17.59. The current P/E Ratio 16.67 based on a current stock price of 42.50 and 2018 EPS estimate of $2.55. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $42.70. The 10 year low, median and high median Price/Graham Price Ratios are 0.99, 1.10 and 1.20. The current P/GP Ratio is 1.00 based on a stock price of $42.50. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share of 1.41. The current P/B Ratio is 1.34 based on a stock price of $42.50, Book Value of $13,380M and Book Value per Share of $31.77. The current P/B Ratio is some 5.3% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 3.64%. The current dividend yield is 4.00% based on dividends of $1.70 and a stock price of $42.50. The current dividend yield is some 9.9% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Sales (Revenue) Ratio is.1.66. The current P/S 1.96 based on a stock price of $42.50, 2018 Revenue estimate of $9,141M and Revenue per Share of $21.71. The current ratio is almost 18% higher than the 10 year median. This stock price testing suggests that the stock price is relatively reasonable but above the median.
When I look at analysts' recommendations I find Strong Buy (1), Buy (9) and Hold (3) recommendations. The consensus recommendation would be a Buy. The 12 month consensus stock price is $47.90. This implies a total return of 16.71% with 12.71% from capital gains and 4.00% from dividends.
Andrew Walker of Motley Fool says that the company expects to be able to raise dividends by 6% per year until 2022 because of expected cash flows. Bruce Howe on Simply Wall Street worries about debt to equity and that the stock is overpriced. DR Contributor Danvers Record says this company has a Piotroski F-Score of 6 where 8 or 9 says it has a strong balance sheet and 0-2 a weak one.. See what analysts are saying about this stock at Stock Chase. The stock is an interest rate sensitive stock and interest rates and rising. This might be a problem. Most feel the stock is safe.
Fortis Inc. is an electric and gas utility holding company. The company's regulated utilities serve customers across Canada and in the United States and the Caribbean. Its web site is here Fortis Inc.
The last stock I wrote about was about was SNC-Lavalin Group Inc. (TSX-SNC, OTC-SNCAF)... learn more. The next stock I will write about will be WSP Global Inc. (TSX-WSP, OTC- WSPOF)... learn more on Wednesday, April 25, 2018 around 5 pm. Tomorrow on my other blog I will write about Living off Dividends.... learn more on Tuesday, April 24, 2018 around 5 pm.
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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