RE:RE:RE:RE:Not so an exciting market at the moment but...bossu wrote: Thank you Capharnaum ,
Very informative.
Have a look at Fortis bullboard where I made a copy of this morning Globe and Mail
The kind of Company to consider in the kind of market we are in .
It's true that higher yields should compress utilities multiples. Since utilities have a somewhat fixed rate of return, the spread between their rate of return and the 10 year bond (or inflation rate) drives their multiple up.
However, I think in the past that markets have underappreciated the excellent cashflows that utilities generate, as well as their value in terms of limited risk return, and that they used to be undervalued. That's in part due to utilities being traditionnally low growth profile companies (2%), which isn't true for many of them in the current context.
While I do like Fortis, I still prefer Altagas due to its current cheaper valuation, as well as higher growth profile. Fortis expects an increase of 6% going forward to their rate base, while Altagas should be 8-10% on the utilities side. Altagas also has growth potential in their non-utilities for the next few years. Both companies have about the same payout ratio at the moment, but due to higher valuation, it yields significantly less as a dividend for Fortis than it does for Altagas.