Is it a good company at a reasonable price? I have done well with most of my utility stocks over time. I still think that this is a good utility stock. I plan to hold on to my shares, but I will not buy more as I have enough of this company in my portfolio. The stock price is reasonable.
I own this stock of Fortis Inc (TSX-FTS, OTC-FRTSF). I bought this stock as Newfoundland Light and Power Co. Ltd. Class A shares in 1987. I bought more in 1995, 1998 and 2005.
When I was updating my spreadsheet, I noticed I first bought this stock 35 years ago and then made a few other purchases over the years, the last being in 2005. I have earned a total return of 12.86% per year with 7.48% from capital gains and 5.38% from dividends.
If you had invested in this company in December 2012, for $1,026.60 you would have bought 30 shares at $34.22 per share. In December 2022, after 10 years you would have received $503.25. in dividends. The stock would be worth $1,625.40. Your total return would have been $2,128.65.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $34.22 | $1,026.60 | 30 | 10 | $503.25 | $1,625.40 | $2,128.65 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.73%. The 5, 10 and historical dividend yields are also moderate at 3.34%, 3.34% and 3.71%. The dividend increases are low (below 8% per year) at 6% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 is 78% with 5 year coverage at 73%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 78% with 5 year coverage at 75%. The DPR for Adjusted Funds from Operations (AFFO) for 2022 is 58%, with 5 year coverage at 65%. The DPR for Cash Flow per Share (CFPS) for 2022 is 29% with 5 year coverage at 29%. The DPR for Free Cash Flow (FCF) cannot be calculated because of negative FCF.
Debt Ratios are fine, but debt is high. The Long Term Debt/Market Cap Ratio for 2022 is high at 0.99. However, utilities tend to have high debt levels. The Liquidity Ratio for 2022 is low at 0.65. If you add on Cash Flow after dividends it only gets to 0.95%. This means that the current assets cannot cover the current liabilities when the ratio is below 1.00. If you add back the current portion of the Long Term Debt, you get a ratio of 1.52. You need to ensure that debt can be rolled over in this case. The Debt Ratio is for 2022 is good at 1.55.
The Total Return per year is shown below for years of 5 to 41 to the end of 2022. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 5.95% | 7.21% | 3.28% | 3.93% |
| 2012 | 10 | 6.10% | 8.61% | 4.70% | 3.90% |
| 2007 | 15 | 6.70% | 7.94% | 4.26% | 3.69% |
| 2002 | 20 | 7.78% | 11.88% | 7.35% | 4.53% |
| 1997 | 25 | 6.59% | 10.95% | 6.78% | 4.16% |
| 1992 | 30 | 6.05% | 12.50% | 7.54% | 4.97% |
| 1987 | 35 | 5.77% | 12.35% | 7.20% | 5.15% |
| 1982 | 40 | 6.04% | 13.61% | 7.50% | 6.11% |
| 1981 | 41 | 6.19% | 13.31% | 7.37% | 5.94% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 17.63, 20.14 and 22.63. The corresponding 10 year ratios are 17.64, 19.75 and 21.83. The corresponding historical ratios are 13.08, 15.04 and 16.82. The current P/E Ratio is 18.71 based on a stock price of $60.67 and EPS estimate for 2023 of $2.96. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 17.63, 20.38 and 22.89. The corresponding 10 year ratios are 17.22, 19.49 and 21.49. The current P/AEPS Ratio is 20.57 based on a stock price of $60.67 and AEPS estimate for 2023 of $2.95. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 15.75, 17.21 and 19.04. The corresponding 10 year ratios are 15.30, 17.08 and 19.10. The current P/AFFO Ratio is 16.22 based on a stock price of $60.67 and AFFO estimate for 2023 of $3.74. The current ratio is 5.7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $51.54. The 10-year low, median, and high median Price/Graham Price Ratios are 0.96, 1.11 and 1.22. The current P/GP Ratio is 1.18 based on a stock price of $60.67. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Book Value per Share Ratio of 1.41. The current P/B Ratio is 1.52 based on a Book Value of $19,407, Book Value per Share of $40.25 and a stock price of $60.67. The current ratio is above the 10 year median ratio by 7%. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2023 of $42.00. Because for this estimate, the Book Value is calculated differently than mine, the current P/B Ratio would be 1.20. The estimate would imply a Book Value of $20,252M, and a ratio of 1.44 with a stock price of $60.67. This current ratio of 1.44 is 20.1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.70. The current P/CF Ratio is 8.44 based on a stock price of $60.67, Cash Flow per Share estimate for 2023 of $7.19 and a Cash Flow of $3,467M. The current ratio is 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 3.71%. The current dividend yield is 3.73% based on a stock price of $60.67 and dividends of $2.26. The current dividend yield is 0.4% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 3.34%. The current dividend yield is 3.73% based on a stock price of $60.67 and dividends of $2.26. The current dividend yield is 11.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 2.32. The current P/S Ratio is 2.59 based on a stock price of $60.67, Revenue estimate for 2023 of $11,274M and Revenue per Share of $23.38. The current ratio is 12% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests show the price as reasonable and below the median, and the P/S Ratio test shows the stock price as reasonable, but above the median. The other tests, except for the P/B Ratio estimate test, shows the stock price as reasonable and above or below the median.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2), Hold (10), Underperform (1) and Sell (2). The consensus is a hold. The 12 month stock price consensus is $58.04. This implies a Total Return of a loss of 0.61% with a capital loss of 4.33% and dividends of 3.73%. Late last year Stan Wong gave a Do Not Buy recommendations because he said there was a negative total return over the last 12 months. That is the only negative I saw.
Analysts in 2023 on Stock Chase says this stock is a buy. Stock Chase gives this stock 5 stars out of 5. It is on the Money Sense list at 79. Motley Fool says this stock is a retiree staple stock. Andrew Button on Motley Fool says if we have an recession, investors are better off with non-cyclical stocks. The company put out a Press Release about their 2022 results.
Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street gives this stock 2 and one half starts out of 5. Simply Wall Street has w warnings of interest payments are not well covered by earnings; and dividend of 3.8% is not well covered.
Fortis owns and operates eight utility transmission and distribution subsidiaries in Canada and the United States, serving more than 3.4 million electricity and gas customers. The company has smaller stakes in electricity generation and several Caribbean utilities. 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 Algoma Central Corporation (TSX-ALC, OTC-AGMJF) ... learn more on Friday, May 05 around 5 pm. Tomorrow on my other blog I will write about Something to Buy May 2023.... learn more on Thursday, May 4, 2023 around 5 pm.
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