Fortis Inc T.FTS

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Gordon PapeGordon Pape • 3rd+ • 3rd+ Acclaimed Author and Editor of Canada’s Most Highly Regarded Investing NewslettersAcclaimed Author and Editor of Canada’s Most Highly Regarded Investing Newsletters 1w •

1 week ago

 

 

 

For beleaguered utilities stocks, we’re finally seeing a recovery. Not exactly a robust one, but a recovery none the less. Since the beginning of July, the index is up 13%.

Despite some concerns held by some industry watchers and investors, I continue to recommend holding utility stocks or ETF proxies in an income portfolio. My top choice is St. John’s-based Fortis Inc. (TSX, NYSE: FTS). Here’s an update, which originally appeared in my popular investing newsletter, Internet Wealth Builder (IWB).

Prices are as of Nov. 15.

Type: Common stock
Current price: C$62.21, US$44.17
Originally recommended: Jan. 28/16 at C$38.14, US$27.09
Annual payout: $2.36
Yield: 3.8%
Risk: Lower risk
Website: fortisinc.com

Comments: Fortis released its third quarter results last week and they were strong. Net earnings were $420 million ($0.85 per share), up from $394 million ($0.81 per share) in 2023. The increase was driven by rate base growth across the company’s utilities, and strong earnings in Arizona, which largely reflected new customer rates at Tucson Electric Power effective Sept. 1.

On a year-to-date basis, net earnings were $1.2 billion ($2.45 per share), an increase of $85 million, or $0.13 per share compared to the same period in 2023.

The company announced a new 2025-2029 capital plan that totals $26 billion. That’s $1 billion higher than the previous five-year plan. Fortis says the plan is low-risk and highly executable, with nearly all investments being regulated and only 23% relating to major capital projects.

The plan is expected to increase the midyear rate base from $38.8 billion in 2024 to $53 billion by 2029, translating into a five-year compound annual growth rate of 6.5%.

In September, the board of directors approved a 4.2% increase in the quarterly dividend to $0.615 ($2.46 a year), effective with the Dec. 1 payment. This marks the 51st consecutive year that the company has increased its payout. Management is targeting annual dividend increases of between 4% and 6% through the end of 2029.

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