Monday, April 24, 2017

Fortis Inc.

Sound bite for Twitter and StockTwits is: Dividend growth utility. This stock has done well for me over the longer term. Its heavy debt load gives it some vulnerability especially during any bad time. Price seems to be reasonable at the current time. See my spreadsheet on Fortis Inc.

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 and 1998. In 2005 I sold some Fortis from my RRSP account as I needed to get $20,000 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.

What I noticed when doing the spreadsheet was the increase in shares of 42% for 2016. Most of this was a public offering to purchase ITC Holdings Corp. Fortis debt has also increased dramatically by some 88%. The Debt/Market Cap Ratio is now over 1.00 at 1.27. Their debt ratios have never been great and they are very low at present.

The current Liquidity Ratio is just 0.55. That means that the current assets cannot cover their currently liabilities. Even adding in cash flow after dividends this ratio just becomes 0.87. You can add in the current portion of the debt and still the ratio is just 0.93. This leaves the company vulnerable, especially if there are any problems. On the other hand, most analysts think that it will do just fine.

I have had this stock for some 29 years. I have made a return of 13.02% per year from it. Of my return 8.06% is from capital gains and 4.96% is from dividends. I first bought this stock in1987 and then more in 1995 and 1995. I sold some in 2005. It is some 4.8% of my portfolio.

The 5 year low, median and high median Price/Earnings per Share are 19.15, 20.09 and 20.76. The 10 year values are 16.97, 18.61 and 20.50. The historical values are 13.49, 15.68 and 17.79. It would appear that some of the recent run up in price is due to increasing P/E Ratios. I think that the recent values are rather high for a utility stock. The current P/E Ratio is 17.91. This is based on a stock price of $44.23 and 2017 EPS estimate of 2.47. This stock price testing suggests that the current stock price is relatively reasonable. This is my least favourite method to determine how good a stock price is.

I get a Graham Price of $42.38. The 10 year low, median and high median Price/Graham Price Ratios are 0.99, 1.12 and 1.22. The current P/GP Ratio is 1.04 based on a stock price of $44.23. This stock price testing suggests that the current stock price is relatively reasonable and below the median.

The 10 year Price/Book Value per Share Ratio is 1.43. The current P/B Ratio is 1.37 based on BVPS of $32.31 and a stock price of $44.23. The current P/B Ratio is some 4% lower than the 10 year ratio. This stock price testing suggests that the current stock price is relatively reasonable and below the median.

I get an historical median dividend yield of 3.60%. The current dividend yield is 3.62% based on dividends of $1.60 and a current stock price of $44.23. The current dividend yield is just below the historical dividend yield. This stock price testing suggests that the current stock price is relatively reasonable and below the median.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. Most are Buy recommendations and the consensus is a Buy recommendation. The 12 month stock price consensus is $48.83. This implies a total return of 14.025 with 10.40% from capital gains and 3.62% from dividends.

Yadullah Hussain on Financial Post talks about what the purchase of ITC Holdings Corp means for Fortis. Doug Wharley on The Cerbat Gem talks about Scotiabank raised their target price from $48 to $49 for this stock. See what analysts are saying about this stock on Stock Chase

Fortis a diversified infrastructure holding company, primarily comprising gas distribution and electric utilities in Canada, the U.S., Turks and Caicos, and the Cayman Islands. Fortis also has interests in electricity generation ventures in Canada and the U.S. 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 Power Financial Corp. (TSX-PWF, OTC-POFNF)... learn more on Wednesday, April 26, 2017 around 5 pm. Tomorrow on my other blog I will write about the current Pension Crisis... learn more on Tuesday, April 25, 2017 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.