FORTIS INC. $33 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 186.9 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, the U.S. and the Cayman Islands. In addition, wholly owned FortisBC Energy distributes natural gas in British Columbia.
Fortis recently agreed to buy CH Energy Group (New York symbol CHG), which supplies electricity to 300,000 customers in New York State. This company does not own power plants; instead, it buys electricity from other producers. It also distributes natural gas to 75,000 users.
Regulators must still approve the deal, but Fortis should close it in early 2013. It will pay $1.5 billion U.S., including $500 million U.S. of CH’s debt.
Meanwhile, Fortis’s earnings rose 8.8% in the three months ended June 30, 2012, to $62 million from $57 million a year earlier. The company sold $601 million worth of new common shares to help pay for CH. Because of these extra shares, earnings per share rose just 3.1%, to $0.33 from $0.32.
Revenue fell 6.4%, to $792 million from $846 million. That’s mainly due to the loss of its power business in Belize, which was seized by that country’s government in June 2011.
The stock trades at 19.8 times the company’s likely 2012 earnings of $1.72 a share. The $1.20 dividend yields 3.5%.
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