Why Fortis Inc. Rose 1% on Friday

Fortis Inc. (TSX:FTS)(NYSE:FTS) released its Q2 results on Friday, and its stock responded by rising about 1%. Can it continue higher? Let’s find out.

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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.

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 Joseph Solitro has no position in any stocks mentioned.

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