How Fortis Inc. Could Power Your Dividend Portfolio

Stable sales, healthy expansions, and 40 years of dividend increases put Fortis Inc. (TSX: FTS) above the competition.

| More on:
The Motley Fool

Canada’s largest investor-owned utility, Fortis Inc. (TSX: FTS), is a company that will rarely see its stock soar to great heights. In fact, it has been unable to break the $35.00 mark since February 2011.

The company’s operations at home in Canada, however, still boast a strong track record — with its Eastern electricity generation and B.C. natural gas segment. Also, thanks to a slew of acquisitions, Fortis has been able to gain market share in the northeastern U.S. and, most recently, Arizona.

The stock price has been enjoying a nice climb since bottoming out at $29.58 in December 2013, as it closed Friday at $34.34. But, unfortunately, the stock is still treading water in the $30.00 to $34.00 range as it has for the past three years.

Fortis, nonetheless, is still one of the country’s most consistent dividend machines. With 40 consecutive years of dividend increases, this stock has grown to a dividend payout of $1.28 annually with a yield of 3.7%. So what does the future hold for Fortis’ stock and dividend program?

A great plus to its dividend program is the fact that 90% of its business is regulated, providing stable and predictable revenues. With large swaths of Atlantic Canada’s power supply along with operations in Ontario and just under 1 million natural gas customers in southern British Columbia, Fortis has been able to establish a sizable market share in a country dominated by crown and formerly crown-owned utilities.

UNS Energy deal finalized

Along with its Canadian operations, Fortis has made great strides into the U.S. market with its most recent acquisition becoming officially completed. The $4.3 billion deal to acquire Arizona-based UNS Energy has received federal and state regulatory approval, the last step investors have been waiting for.

UNS Energy adds 657,000 new electricity and gas customers and about $1.5 billion in annual revenues to Fortis’ portfolio in addition to $4.5 billion worth of assets and $2 billion worth of debt. Thanks to this acquisition, analysts are projecting double-digit earnings growth for Fortis. Perhaps this could be the final push to break the stock through its $35.00 ceiling and to its average price target of $35.70.

Recent results

Fortis is by no means hurting when it comes to its financials. In its previous quarter, it posted revenues of $1.05 billion, up from $790 million during the same period last year. Year-to-date revenues are $600 million ahead of last year, setting up a very interesting Q4 report. This growth should be tempered with the fact that earlier acquisition of Central Hudson Gas & Electric Corp. helped boost these numbers.

Net earnings came in a little low at $63 million, down from $70 million, but this shouldn’t be cause for alarm as this decrease is from the purchase of UNS Energy — specifically, a $13 million interest charge stemming from convertible debentures issued to finance some of that deal.

Fortis won’t knock your socks off with its share price today, but its dividend will impress you down the road. This is a great stable dividend option for investors as demand for energy will only increase. Because whether you’re charging your smartphone in Newfoundland or keeping warm in British Columbia, Fortis will continue to pump out its dividend increases.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Cameron Conway has no position in any stocks mentioned.

More on Dividend Stocks

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

This 8% Dividend Stock Pays Cash Every Month

Earn monthly cash of $154 with this 8% dividend stock.

Read more »

oil tank at night
Dividend Stocks

Think Oil Is Going Higher? 3 Dividend Stocks to Buy Now

Looking for steady dividend growth? These three Canadian oil stocks could provide substantial dividend income in the coming years.

Read more »

Profit dial turned up to maximum
Dividend Stocks

This 7% Dividend Stock on the TSX is Worth Watching

With this superb TSX stock now trading at the bottom of its 52-week range, it's certainly a dividend stock you'll…

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 TSX Dividend Stocks to Buy While They Still Offer Great Yields

These top dividend-growth stocks now offer 7% dividend yields.

Read more »

Dots over the earth connecting the world
Dividend Stocks

1 Magnificent Dividend Stock Down 23% to Buy Right Now Near a Once-in-a-Decade Valuation

Patient investors could be happy with this dividend stock a few years down the road.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Best Stocks to Buy in May 2024: TSX Real Estate Sector

Besides yielding stable monthly passive income, these top TSX real estate stocks could help you earn high returns on your…

Read more »

exchange-traded funds
Dividend Stocks

These 2 Dividend ETFs Are a Retiree’s Best Friend

Retirees looking for steady income will love these two Canadian dividend ETFs

Read more »

Bad apple with good apples
Dividend Stocks

Safe and Sound Stocks for Canadians: My Top 5 Choices

Want some of the best stocks for Canadians right now? Here's my top 5 list of stocks to buy today…

Read more »