Bucking up an investor in despair about his lame utility stock
By Rob Carrick, Globe and Mail, JANUARY 26, 2021
https://www.theglobeandmail.com/investing/markets/inside-the-market/article-rob-carrick-bucking-up-an-investor-in-despair-about-his-lame-utility/
Markets are so, er, buoyant right now that stocks just poking along look like complete losers.
Take the blue-chip, dividend-growth stalwart Fortis Inc. (
FTS), for example. “Fortis stock has done absolutely terribly recently,” a reader recently told me via e-mail. “Have I missed something? What has changed?”
The answer is that Fortis is as Fortis ever was. A utility stock that delivers long-term value to investors but gets outmuscled when the markets are flying. Over the past nine months, Fortis shares are down 2 per cent while the S&P/TSX Composite Index gained 24 per cent.
Fortis does pay a dividend that in late January offered a yield of 3.9 per cent. That’s not bad at all, given the 0.4 per cent yield on five-year Government of Canada bonds. But that recent share-price malaise certainly stands out, at least until you look at longer-term numbers.
Globeinvestor.com shows that investors who held Fortis shares through the past five years have made a cumulative 44 per cent or so, pretty much even with the S&P/TSX Composite. Fortis crushed the index 58 per cent to 27 per cent over the previous 10 years.
The analyst consensus on Fortis isn’t going to excite investors looking for doubles and triples. Globe Investor shows a consensus analyst rating of “moderate buy.” A sample rating: “Sector perform” from an RBC Dominion Securities report dated Jan. 17. The price target in this report is $60, a solid premium over the late January share price of $52 or so.
Never mind the price, though. Fortis is a stock you own for a rising flow of dividend income.
Check out the dividend history displayed on the Fortis website – consistent increases dating back to 1972. Not many companies in the Canadian market have that kind of a dividend-growth track record.
The Fortis website also shows the company’s payout ratio, which is the total dividend payout shown as a percentage of net income. Fortis’s payout ratio has been falling since 2016, which provides a degree of assurance that dividend payouts – and better, growth – are sustainable.
Fortis does look kind of lame in the context of what’s happening in the stock market today. But it’s still a “hold” for those with a long-term view, if not a “buy.”