The U.S. dollar continues to gain strength against the loonie, and that is providing a windfall for Canadian companies with U.S.-based operations.
Fortis is an electricity generation and natural gas distribution company with assets located in Canada, the U.S., and the Caribbean.
The company spent $4 billion last year to acquire Arizona-based UNS Energy in a deal that significantly increased the company’s exposure to the U.S. market. In fact, Fortis now receives more than 40% of its revenue from operations in the United States.
Fortis is a great pick for conservative dividend investors because the company gets about 96% of its revenue from regulated assets. This means cash flow and earnings are reasonably predictable.
The integration of UNS has gone well, and Fortis recently increased the quarterly dividend by 10% to $0.375 per share. The company has raised the payout every year for more than four decades, so investors should feel comfortable with the reliability of the 4% yield.
TD is well known for its strong retail banking operations in Canada, but the company actually has more branches in the U.S. than it does in the home market.
This wasn’t always the case. In fact, a little over a decade ago TD had almost no exposure at all to the U.S. personal and commercial banking sector. Management decided to launch an ambitious $17 billion spending spree and acquired assets from Maine right down the east coast to Florida. Today, TD is a top-10 bank in the United States.
TD reported fiscal Q4 2015 adjusted net income of $2.177 billion. The U.S. operations contributed about 30% of the profits.
How big an impact does the strong dollar have?
TD’s U.S. dollar-adjusted earnings rose by 6% in the quarter, but profits increased by 27% when converted to the Canadian currency.
With the Canadian economy working its way through a rough patch, TD’s U.S. exposure makes the bank more attractive than some of its peers. The stock pays a quarterly dividend of $0.51 per share that yields about 3.7%. TD increased the distribution by 9% in 2015.