Is it a good company at a reasonable price? This would be a good stock to have in any portfolio. As with all stocks, it is always best to buy shares over a few years. It is also best to buy in different months. This is especially true if you are just starting out. You buy this stock for diversification. I still like this company and think it is a long term buy. It is a utility and is relatively safe. However, it might be too pricey currently as it is close to its all-time high, although it is testing as relatively 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. In 2005 I sold some Fortis from my RRSP account as I needed to get $20,000 cash in this account 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 had this stock for some 37 years and I have made a total return of 12.57% per year with 7.35% from capital gains and 5.22% from dividends.
If you had invested in this company in December 2014, for $1,012.96 you would have bought 26 shares at $38.96 per share. In December 2024, after 10 years you would have received $492.05 in dividends. The stock would be worth $1,552.98. Your total return would have been $2,045.03. This would be a total return of 8.30% per year with 4.37% from capital gain and 3.94% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $38.96 | $1,012.96 | 26 | 10 | $492.05 | $1,552.98 | $2,045.03 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.67%. The 5, 10 and historical median dividend yields are also moderate at 3.35%, 3.35% and 3.73%. The dividend growth is low (below 8% per year) at 5.5% per year over the past 5 years. The last dividend increase was in 2024 and it was for 4.3%.
The Dividend Payout Ratios (DPR) are fine as the DPR for AEPS has always been high. The DPR for 2024 for Earnings per Share (EPS) is high at 74% with 5 year coverage at 76%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is high at 73% with 5 year coverage at 76%. The DPR for 2024 for Adjusted Funds from Operations (AFFO) is fine at 61% with 5 year coverage at 63%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 32% with 5 year coverage at 30%. The DPR for 2024 for Free Cash Flow (FCF) is non-calculable because of negative FCF, but there is no agreement on what FCF is. However, there is an agreement that the FCF is negative.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 73.61% | 75.56% |
| AEPS | 72.71% | 75.66% |
| AFFO | 60.53% | 62.91% |
| CFPS | 32.06% | 30.64% |
| FCF | -84.46% | -90.82% |
Debt Ratios are fine, but the company has a lot of debt, but utility companies do. The Long Term Debt/Market Cap Ratio for 2024 is too high at 1.05 and currently at 0.91. The Liquidity Ratio for 2024 is too low at 0.63 and 0.63 currently. If you added in Cash Flow after dividends, the ratios are still low at 1.07 and currently at 1.08. I like this ratio to be 1.50 or higher. If you add back in current debt the ratio is fine at 1.60 and currently at 1.61. The Debt Ratio for 2024 is good at 1.54 and 1.54 currently. The Leverage and Debt/Equity Ratios for 2024 are fine at 2.84 and 1.84 and currently at 2.84 and 1.84.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 1.05 | 0.91 |
| Intang/GW | 0.50 | 0.43 |
| Liquidity | 0.63 | 0.63 |
| Liq. + CF | 1.07 | 1.08 |
| Liq. +CF+D | 1.60 | 1.61 |
| Debt Ratio | 1.54 | 1.54 |
| Leverage | 2.84 | 2.84 |
| D/E Ratio | 1.84 | 1.84 |
The Total Return per year is shown below for years of 5 to 43 to the end of 2024. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 5.47% | 5.92% | 2.08% | 3.84% |
| 2014 | 10 | 6.42% | 8.30% | 4.37% | 3.94% |
| 2009 | 15 | 5.69% | 8.98% | 5.01% | 3.97% |
| 2004 | 20 | 7.71% | 10.69% | 6.37% | 4.32% |
| 1999 | 25 | 6.87% | 13.90% | 8.46% | 5.44% |
| 1994 | 30 | 6.09% | 13.02% | 7.78% | 5.24% |
| 1989 | 35 | 5.69% | 11.91% | 7.00% | 4.91% |
| 1984 | 40 | 5.83% | 12.02% | 6.88% | 5.14% |
| 1981 | 43 | 6.13% | 13.26% | 7.26% | 6.00% |
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 16.98, 18.77 and 20.73. The corresponding historical ratios are 13.19, 15.44 and 17.59. The current ratio is 18.71 based on a stock price of $67.07 and EPS estimate for 2025 of $3.40. 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 16.31, 18.10 and 19.89. The corresponding historical ratios are 16.39, 18.16 and 19.92. The current ratio is 19.61 based on a stock price of $67.07 and AEPS estimate for 2025 of $3.42. 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 Graham Price of $58.63. The 10-year low, median, and high median Price/Graham Price Ratios are 0.96, 1.05 and 1.15. The current P/GP Ratio is 1.14 based on a stock price of $67.07. 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 1.38. The current ratio is 1.50 based on a Book Value of $22,307M, Book Value per Share of $44.68 and a stock price of $67.07. The current ratio is 8% above the 10 year median ratio. 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 2025 of $47.36, but this analyst calculates the Book Value differently from me and has a 10 year median P/B Ratio of 1.26. The Book Value per Share estimate of $47.36 implies a ratio of 1.42 and a Book Value of $23,647M. This 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.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.18. The current ratio is 8.51 based on a Cash Flow per Share estimate for 2025 of $7.88, Book Value of $3,933M and a stock price of $67.07. This ratio is 4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 3.73%. The current dividend yield is 3.67% based on dividends of $2.46 and a stock price of $67.07. The current ratio is 2% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 3.35%. The current dividend yield is 3.67% based on dividends of $2.46 and a stock price of $67.07. The current ratio is 10% above the 10 year 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 2.43. The current ratio is 2.69 based on Revenue estimate for 2025 of $12,438M, Revenue per Share of $24.91 and a stock price of $67.07. The current ratio is 11% 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 still reasonable. The 10 year dividend yield test says the stock price is reasonable and below the median. The P/S Ratio test says the stock price is reasonable but above the median. Most of the rest of the testing is saying that the stock price is reasonable but above the median.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (0), Hold (10), Underperform (3) and Sell (2). The consensus would be a Hold. The 12 month stock price consensus is $63.87 with a high of $70.00 and low of $42.00. The consensus stock price of $63.87 implies a total loss of 1.10% with 4.77% from a capital loss and 3.67% from dividends.
Latest analyst on Stock Chase says the price is too high for a current buy. In 2025 some like this stock and think it is a buy, some like other stocks better. One analyst likes its long history of dividend payments. Chris MacDonald on Motley Fool thinks this is the dividend stock that all Canadians should own. It has a great history of rising its dividend. Andrew Walker on Motley Fool likes this stock because it has increased its dividends annually for decades. The company put out a Press Release about their fourth quarter results for 2024.
This company was reviewed by Zacks via Yahoo Finance saying the company is expected to beat earnings estimates. Simply Wall Street via Yahoo Finance talks about who controls this stock. Simply Wall Street has two warnings on this stock of interest payments are not well covered by earnings; and dividend of 3.6% is not well covered by free 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 Monday, May 5, 2025 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