Investing in value stocks is one of the best ways to facilitate long-term capital appreciation. However, while choosing such companies, it is essential to assess their underlying potential. This will help ensure that your investment appreciates in value in the long run, thereby making this strategy successful.
When it comes to the Canadian stock market, Fortis (TSX:FTS) is an excellent value stock.
Here are the reasons why.
Fortis reports strong performance in Q1 2023
Fortis’s net earnings for the first quarter (Q1) of 2023 rose to US$437 million from last year’s US$350 million. This amounts to US$0.90 per common share from Q1 2022’s US$0.74 per share. Its adjusted net earnings per share reached US$0.91 from last year’s US$0.78.
Moreover, the company saw capital expenditures of US$1 billion in the quarter. This keeps the Canadian energy giant on track to invest a total of US$4.3 billion this year. Indeed, it’s my view that Fortis’s continued commitment to reinvesting in their assets will drive growth over the long term.
Sale of natural gas storage assets in British Columbia
In early May, Fortis indicated it would sell its natural gas storage assets in British Columbia. This deal involves sale of 100% stake of its Aitken Creek North Gas Storage Facility and a 93.8% stake of its Aitken Creek Natural Gas Storage Facility. The agreement has been finalized with a subsidiary of Enbridge for $400 million.
This deal is set to close by the end of this year and will be subject to customary closing adjustments and conditions. This deal will help Fortis further strengthen its balance sheet, allowing for better allocation of funds to the company’s growth and expansion plans as well as dividend increases over time.
Increasing shareholder returns in the last five years
Fortis has been successful in providing increasing returns to its shareholders over the last five years. During this time, its share price has appreciated by 29%. Additionally, the company has had annual earnings per share growth of 3.5% over this time frame.
Apart from this, total shareholder returns in the last five years have been recorded at 56%. This further exemplifies Fortis as a reliable value stock.
Bottom line
Overall, Fortis remains a top dividend stock and value pick that I think is worth buying in this environment. The company’s reasonable multiple, 50-year history of dividend increases, and stable cash flows are hard to find in this market. In many respects, Fortis is a one-of-a-kind company that’s worth snapping up on dips.
