CAGR 6% to continue into 2027. Ben PhamSeptember 28, 2022 | 18:50 ET~
Fortis FTS-TSX Rating Market Perform Price: Sep-28 $54.74 Target $60.00 Total Rtn 14%
Increases Quarterly Dividend by ~5.6%
Bottom Line: FTS's ~5.6% increase in its quarterly dividend is generally in line with our expectations, market expectations and management's guidance (6% growth through 2025) and reinforces the reliability of its rate base growth and the high quality of its largely regulated asset base. Similar to last year, there was no extension of the 6% dividend growth guidance through 2025.
Reiterate Market Perform rating and $60 target.
Key Points • ~5.6% dividend increase in line with market expectations.
Fortis’s Board of Directors has announced a quarterly dividend of $0.565/sh (effective Q4/22), a ~5.6% increase from the current quarterly rate of $0.535/sh. The annualized common share dividend will be $2.26/sh (vs. $2.14/sh), resulting in a ~4% yield at current prices and 2024E EPS payout of ~82%. This increase is generally in line with our modeling, market expectations and management's guidance and represents the company's 49th consecutive year of dividend increases (one of the longest for any Canadian publicly traded company). •
Capital plan to be rolled forward with Q3/22 results. Although FTS did not extend its dividend growth guidance beyond 2025, we expect FTS to announce capex and rate base growth guidance for the 2023-2027 period with Q3/22 results.
Current rate base CAGR guidance is ~6% through 2026, and we expect at least a similar level of growth to be extended into 2027.