Fortis Inc. (TSX:FTS)(NYSE:FTS), one of North America’s largest electric and gas utilities companies, announced its second-quarter earnings results before the market opened on Friday, and its stock responded by rising about 1% in the day’s trading session. Let’s take a closer look at the results and the fundamentals of its stock to determine if we should be long-term buyers today.
A very strong quarterly performance
Here’s a quick breakdown of six of the most notable statistics from Fortis’s three-month period ended on June 30, 2017, compared with the same period in 2016:
| Metric | Q2 2017 | Q2 2016 | Change |
| Revenue | $2,015 million | $1,485 million | 35.7% |
| Operating income | $622 million | $311 million | 100% |
| Earnings before income taxes | $414 million | $170 million | 143.5% |
| Adjusted net earnings | $253 million | $129 million | 96.1% |
| Adjusted earnings per share (EPS) | $0.61 | $0.45 | 35.6% |
| Operating cash flow | $649 million | $448 million | 44.9% |
Should you buy Fortis today?
It was a fantastic quarter overall for Fortis, and it capped off a great first half of the year. Its revenue increased 31.7% year over year to $4.29 billion, and its adjusted EPS increased 15.9% year over year to $1.31. That being said, I think its stock should have risen much more than 1% on Friday, and I think it represents a very attractive long-term investment opportunity today for two main reasons.
First, it’s attractively valued. Fortis’s stock trades at just 18.3 times fiscal 2017’s estimated EPS of $2.47 and only 17.3 times fiscal 2018’s estimated EPS of $2.60, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 20.5. These multiples are also inexpensive given its current earnings-growth rate and its estimated 6% long-term growth rate.
Second, it’s one of the market’s best dividend stocks. Fortis currently pays a quarterly dividend of $0.40 per share, equal to $1.60 per share annually, which gives it a generous 3.55% yield. It’s also very important to note that the company’s 6.7% dividend hike in September 2016 has it on pace for 2017 to mark the 44th consecutive year in which it has raised its annual dividend payment, and it has a dividend-growth program in place that calls for annual growth of approximately 6% through 2021, making it both a high-yield and dividend-growth play.
With all of the information provided above in mind, I think Fortis would make a great addition to any Foolish portfolio.
