FORTIS INC. $23 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 169.2 million; Market cap: $3.9 billion; Price-to-sales ratio: 0.9; SI Rating: Above Average) generates and distributes electricity in five Canadian provinces. It also owns power plants in the U.S. and the Caribbean, as well as hotels and commercial real estate in Atlantic Canada.
Regulated businesses account for over 90% of Fortis’s revenue, which gives it plenty of steady cash flow for dividends. In fact, the company has increased its dividend each year for the past 36 years. The current rate of $1.04 yields 4.5%.
Fortis is also enjoying the benefits of its July 2007 purchase Terasen Inc., which distributes natural gas in B.C. Fortis’s earnings rose 26.9%, to a record $245 million in 2008 from $193 million in 2007. The gain was mainly because of $118 million from Terasen, compared to $50 million for the 7.5 months that Fortis owned it in 2007. Earnings per share rose 15.2%, to $1.52 from $1.32 on 14% more shares outstanding. Revenue rose 43.6%, to $3.9 billion from $2.7 billion.
The stock trades at 14.8 times the $1.55 a share it will probably earn in 2009. This p/e ratio is higher than other utilities, but reasonable considering Fortis’s diverse revenue sources of wide geographic presence.
Fortis is a buy.
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