Yesterday, Fortis (TSX:FTS)(NYSE:FTS), one of the oldest Canadian Dividend Aristocrats, reported earnings for the first quarter of 2022 and reminded us why it’s one of the best and safest stocks you can own in this environment. However, after a significant rally in the last few months, you may be wondering if it’s one of the best stocks to buy right now.
Utility stocks like Fortis have been among the most in-demand stocks lately for several reasons. Firstly, with investors concerned that there could be a potential recession on the horizon, Fortis, with its highly defensive business operations, is one of the best stocks you can own.
In addition, because it’s such a reliable company, the stock is not very volatile. So, during periods of uncertainty and heightened volatility like we’ve seen lately, Fortis is a stock that can protect your capital better than almost any other Canadian stock.
Here’s how Fortis performed in the first quarter and whether or not the utility company is one of the best stocks you can buy today.
Fortis’s Q1 earnings
Fortis has long been one of the best low-risk Canadian stocks to buy. Therefore, in the current market environment, you can bet many investors had their eye on its earnings report, and Fortis didn’t disappoint.
The Canadian Dividend Aristocrat reported that its adjusted earnings per share (EPS) was $0.78. That was slightly above its adjusted EPS of $0.77 from the same quarter last year. However, it was slightly below the consensus estimate of $0.79.
That’s not all, though. Fortis also announced a net-zero direct GHG emissions target, where the company will commit to reducing all of its direct GHG emissions by 2050. This comes in addition to its prior mid-term 2035 target of reducing GHG emissions by 75% from 2019 levels without using any carbon offsets.
This new commitment is a significant and positive development, not just as a step in the right direction for the environment, but ESG is also increasingly an important factor among investors, especially institutional investors.
Going forward, the company continues to progress through its five-year capital program, which began this year. And over the course of the program, Fortis is expecting to increase its rate base at a compounded annual growth rate (CAGR) of 6% through 2026.
It also expects to increase its dividend payments at a CAGR of 6% over that period, showing why it’s always been one of the best stocks to buy for reliable dividend growth. Today, its dividend offers a yield of roughly 3.5%.
As you can see by Fortis’s capital program and its expectations going forward, because the stock is such a low-risk investment, much of its growth is highly predictable. And while it won’t ever post rapid growth like a tech stock might, it’s clear what a safe and reliable business Fortis is.
Is Fortis one of the best stocks to buy now?
There’s no question that Fortis is one of the best Canadian stocks to buy if you can get it at the right price. The question today is whether Fortis is undervalued enough that we can justify an investment.
As of Wednesday’s close, the stock was trading at $61.01 — just 6% off its 52-week high. Currently, Fortis’s stock is trading at a forward price-to-earnings (P/E) ratio of 21.1 times. That’s at the top end of its historical range and above its five-year average of 18.7 times, which is not surprising, given the market environment we’re in today.
It’s also worth noting that Fortis is valued slightly higher than some of its utility peers. However, that’s also not surprising, considering Fortis is so reliable and one of the best utility stocks that you can buy. So, it’s understandable that the market typically rewards Fortis with a premium.
Therefore, if you’re an investor looking to shore up your portfolio and in need of a highly reliable and safe stock to protect your money, you could consider Fortis today, as the stock is fairly valued.
However, if you’re an investor who can wait for a pullback in the stock, you could have the opportunity to buy one of the best and safest stocks in Canada while it’s undervalued.
