Is it a good company at a reasonable price? It is interesting that the analysts’ recommendations are rather negative, but I cannot find much in the way of negative comment on this stock. Although one analyst remarked that utilities are currently out of favour because of high interest rates. The stock price is coming up reasonable, with the 10 year median dividend yield test saying the stock price is relatively cheap. I have no intentions of selling any of my shares.
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. In 2005 I sold some Fortis from my RRSP account as I needed to get $20,000 in this account for a withdrawal and I was concerned about the debt liquidity of this stock. However, this stock continues to be one of my big stock holdings.
When I was updating my spreadsheet, I noticed I have done well with this stock. I have had it for 36 years and have made 12.47% per year with 7.07% from capital gains and 5.40% from dividends.
If you had invested in this company in December 2013, for $1,004.85 you would have bought 33 shares at $30.45 per share. In December 2023, after 10 years you would have received $588.06 in dividends. The stock would be worth $1,798.83. Your total return would have been $2,386.89. This would be a total return of 10.42% per year with 6.00% from capital gain and 4.42% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $30.45 | $1,004.85 | 33 | 10 | $588.06 | $1,798.83 | $2,386.89 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.36%. The 5, 10 and historical dividend yields are also moderate at 3.34%, 3.34% and 3.71%. The dividend increases for the past 5 years is low (below 8% per year) at 5.8% per year. The last dividend increase was 2023 and it was for 4.42%. It is not on the current MoneySense list, but it is on my other dividend lists.
The Dividend Payout Ratios (DPR) are rather high, but the DPR for this company has essentially been high forever. The DPR for 2023 for Earnings per Share (EPS) is too high at 74% with 5 year coverage at 74%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is too high at 74% with 5 year coverage at 76%. The DPR for 2023 for Adjusted Funds from Operations (AFFO) is too fine at 62% with 5 year coverage at 64%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 31% with 5 year coverage at 30%. The DPR for 2023 for Free Cash Flow (FCF) is not calculable because the FCF is negative.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 73.71% | 74.04% |
| AEPS | 73.95% | 75.63% |
| AFFO | 62.43% | 64.39% |
| CFPS | 30.92% | 30.20% |
| FCF | -107.85% | -122.97% |
Debt Ratios show that this company has a high debt level. The Long Term Debt/Market Cap Ratio for 2023 are too high at 1.02 and currently at 1.03, but utilities tend to have high debt. The Liquidity Ratio for 2023 is good at 1.55 and 1.50 currently. If you added in Cash Flow after dividends, the ratios are still too low at 1.08 and currently at 1.09. If you take out the current portion of the long term debt the current ratios are fine at 1.76 and currently at 1.78. The Debt Ratio for 2023 is good at 1.55. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.8 and 1.83.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 1.02 | 1.03 |
| Intang/GW | 0.51 | 0.52 |
| Liquidity | 0.67 | 0.67 |
| Liq. + CF | 1.08 | 1.09 |
| Liq. +CF+D | 1.76 | 1.78 |
| Debt Ratio | 1.55 | 1.55 |
| Leverage | 2.83 | 2.83 |
| D/E Ratio | 1.83 | 1.83 |
The Total Return per year is shown below for years of 5 to 42 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 5.78% | 7.86% | 3.67% | 4.18% |
| 2013 | 10 | 6.30% | 10.42% | 6.00% | 4.42% |
| 2008 | 15 | 5.66% | 9.53% | 5.32% | 4.21% |
| 2003 | 20 | 7.68% | 11.33% | 6.76% | 4.57% |
| 1998 | 25 | 6.72% | 11.88% | 7.21% | 4.67% |
| 1993 | 30 | 6.12% | 11.71% | 6.99% | 4.72% |
| 1988 | 35 | 5.78% | 12.23% | 7.04% | 5.19% |
| 1983 | 40 | 5.91% | 12.17% | 6.85% | 5.32% |
| 1981 | 42 | 6.17% | 13.25% | 7.20% | 6.05% |
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 13.15, 15.37 and 17.47. The current P/E Ratio is 18.71 based on a stock price of $54.10 and EPS estimate for 2024 of $3.20. 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 16.73, 18.98 and 21.09. The current ratio is 16.30 based on a stock price of $54.10 and AEPS estimate for 2024 of $3.32. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $54.89. The 10-year low, median, and high median Price/Graham Price Ratios are 0.96, 1.08 and 1.20. The current P/GP Ratio is 0.99 based on a stock price of $54.10. This 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 get a 10-year median Price/Book Value per Share Ratio of 1.40. The current ratio is 1.34 based on a stock price of $54.10, Book Value of $19,786M and Book Value per Share of 40.33. The current ratio is 4% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2024 of $43.70. This analyst calculates book value differently than I do and the 10 year median ratios for this way is 1.26. The Book Value per Share estimate of 43.70 with a stock price of $54.10 implies a ratio of 1.24 and Book Value of $21,439M. This ratio is 2% below the 10 year ratio of 1.26. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.70. The current P/CF Ratio is 7.26 based on a stock price of $54.10, Cash Flow per Share estimate for 2024 of $7.45 and Cash Flow of $3,655M. The current ratio is 16% 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 4.36% based on dividends of $2.36 and a stock price of $54.10. The current dividend yield is 18% 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 dividend yield of 3.34. The current dividend yield is 4.36% based on dividends of $2.36 and a stock price of $54.10. The current dividend yield is 31% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 2.38. The current P/S Ratio is 2.21 based on Revenue estimate for 2024 of $11,992M, Revenue per Share of $24.44 and a stock price of $54.10. The current ratio is 7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is reasonable and maybe cheap. The 10 year dividend yield test says that the stock price is relatively cheap. This is confirmed by the P/S Ratio test which says the stock price is relatively reasonable. Most of the rest of the testing is say that the stock price is reasonable, with the P/AESP test saying the stock price is relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2), Hold (7), Underperform (1) and Sell (1). This rather unusual to have such a range. The consensus would be a Hold. The 12 month stock price consensus is $55.88, with a high of $61.00 and low of $38.00. The consensus price of $55.88 implies a total return of 7.65% with 3.29% from capital gains and 4.36% from dividends.
The only negative comment I see is an analyst said the utilities are under pressure from rising interest rates. Simply Wall Street says it has a low Return on Equity (ROE) for having a rather high debt rate. They do not think that is a good result. There are comments about it debt load.
There are lots of entries on Stock Chase for Fortis and analysts like this stock and think it is a buy. Stock Chase gives this stock 5 stars out of 5. Sneha Nahata on Motley Fool thinks you should buy this stock for passive income. Andrew Walker on Motley Fool thinks that the stock is low and has a great tracker record for dividend increases. The company put out a press release via Business Newswire about their fourth quarter of 2023.
Simply Wall Street via Yahoo Finance reviews this stock and its ROE. Simply Wall Street Gives this stock 3 and one half stars out of 5. Simply Wall Street gives this stock 2 warnings of debt is not well covered by operating cash flow; and dividend of 4.37% is not well covered by cash flows.
Fortis owns and operates eight utility transmission and distribution subsidiaries in Canada and the United States. 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 AtkinsRealis (TSX-ATRL, OTC-SNCAF) ... learn more. The next stock I will write about will be WSP Global Inc (TSX-WSP, OTC-WSPOF) ... learn more on on Friday, May 3, 2024 around 5 pm. Tomorrow on my other blog I will write about Something to Buy May 2024.... learn more on Thursday, May 2, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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 site for an index to these blog entries and for stocks followed. 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment