Fortis (TSX:FTS) is a prominent figure in the world of blue-chip stocks, renowned for its stable and dependable performance. With a broad and diversified portfolio of regulated utilities across North America, Fortis stands out for its long-term reliability and durability as an investment.
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Consistent performance amidst market fluctuations
Since 2004, Fortis has showcased remarkable stability in its earnings. The company’s adjusted earnings per share (EPS) have experienced only declines in four years, though with three of these declines being minor, around 1%.
The most significant drop was approximately 6%, a rare occurrence for Fortis. All of these earnings dips more than recovered in the subsequent year, demonstrating its resilience and strong business fundamentals. This track record highlights the quality and dependability that investors value in Fortis.
A legacy of dividend growth
Fortis is celebrated as one of Canada’s oldest Dividend Aristocrats, boasting an impressive history of 50 years of continuous dividend increases. Over the past decade, the company has achieved a robust 10-year dividend growth rate of 6.3%. This consistent performance has translated into a total return of nearly 10% annually over the last 10 years. To illustrate, an initial investment of $10,000 would have grown to around $25,900, factoring in both dividends and price appreciation.
While Fortis may not offer the highest returns compared to more volatile stocks, its defensive nature and lower risk profile make it an appealing choice for conservative investors. FTS provides stability and a reliable income stream, making it a solid candidate for those with a long-term investment horizon.
Is it too late to buy Fortis stock?
Since July, Fortis has seen a notable rally, with its stock price climbing approximately 15%. This raises the question: is it too late to invest in Fortis? Evaluating the stock’s current valuation is crucial to making an informed decision.
Fortis’s dividend yield serves as a useful gauge for its valuation. Generally, a higher yield indicates a potentially attractive buying opportunity, while a lower yield may suggest caution. At writing, Fortis is trading at $60.75 per share, offering a dividend yield of just under 3.9%. Historical data from YCharts shows that this yield is approximately at the midpoint of its 10-year range, suggesting that the stock is fairly valued at present.
FTS Dividend Yield data by YCharts
Additionally, the price-to-earnings (P/E) ratio is a common metric used to assess stock valuation. Fortis currently trades at about 19 times its adjusted earnings, which aligns with its long-term normal valuation. This further indicates that the stock is fairly valued, reinforcing a “hold” recommendation.
When to strategically buy Fortis stock
For conservative investors, it’s often beneficial to buy on market corrections. For instance, in 2023, Fortis’s stock fell more than 15% from a peak of about $58 to approximately $49 per share. Similarly, in 2022, the stock experienced a 22% decline, attributed largely to rising interest rates. Such market corrections present opportunities to accumulate shares at more attractive prices.
The Foolish investor takeaway
In conclusion, while there is no immediate margin of safety for buying Fortis stock today, its high quality and dependable performance make it a valuable addition to a diversified portfolio. The current recommendation is to “hold” the stock and consider adding shares during market corrections for better long-term gains.
