Fortis (Symbol-FTS)

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jay
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Post by jay »

Can someone please shed some light as to why great names like FTS and TRP are close to their 52 weak lows when major indices are ~25% above?

Thanks
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Post by Michael D »

Contrarians. Safe stocks are getting sold right now because more interest in growth plays.

Solution: Own some RIM too, and trade the market sideways.
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Post by investor99 »

Safe stocks
huh...very tough to define what these are...

I agree that this is what is occuring. Fortis has a 4.8% yield but is still trading at a P/E of almost 14x. I like the dividend for a leveraged strategy but the stock always seems expensive. Their last dividend raise did not inspire much confidence. I want the stock to drop lower.

disclosure - I own FTS
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Post by Michael D »

investor99 wrote:
Safe stocks
huh...very tough to define what these are...

I agree that this is what is occuring. Fortis has a 4.8% yield but is still trading at a P/E of almost 14x.
Maybe I should have said 'growth' stocks. FTS is fully priced, doesn't have amazing growth prospects, but growth the dividend at a stable rate.
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Post by iluvnascar »

....FTS is fully priced, doesn't have amazing growth prospects, but growth the dividend at a stable rate.


I think there is a stat that says that FTS has raised its dividend every year for the past 36 years. That's my recollection - but no guarantee.

I think FTS is an exceptional buy here. TD has it as an "Action List Buy" - their 12-month target is $29 (fwiw); it's "LOW" risk; and there has been insider buying.

Buy it here in the $21.50 - $22 range; and you'll likely get a bounce to $23+; and a dividend within a month. And if you're nervouse, sell call options on the stock.

A very safe, very conservative holding with the prospect of an easy 20-25% return (growth; option premiums; and dividends).
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Post by AltaRed »

Except if there is general market sentiment that we are at the bottom and heading into (slightly) better times, the utility stalwarts will probably stall in share price, regardless of dividend growth.

I tend to believe that (some) utilities are generally expensive at the current time. Having said that, I own and will continue to own some of these as my core dividend blue chips for the longer term.
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Post by iluvnascar »

".....the utility stalwarts will probably stall in share price, regardless of dividend growth. "


....which is a perfect situation to generate call option premiums to supplement the dividend
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Post by Bashful »

Excerpt from RBC Capital Markets research report dated March 20, 2009

- Fortis Could be an Indirect Beneficiary from NEB Decision. The National Energy Board (NEB) released its cost of capital decision for the TQM pipeline, which had the effect of significantly increasing the allowed ROE by roughly 300 basis points.

- Potentially Significant Earnings Upside. Using the framework of the NEB's decision, we estimate that Fortis could realize about $0.22/share of increased earnings.

- Key Risk: Provincial Regulators May Not Follow Suit. The NEB decision does not have any direct impact on Fortis, and it is possible that the provincial regulators may not follow the NEB's lead and increase ROEs. Even if they do, it is uncertain as to how much they will increase returns. However, given the magnitude of the increase in ROEs implied by the NEB's decision, we believe it will be very difficult for the provincial regulators to not improve returns. If there is no ROE relief, it may become difficult for provincially-regulated utility businesses to attract capital given what would be a significant difference in ROEs relative to NEB-regulated pipelines without a meaningfully different risk profile.

- Valuation: Target Price Increased to $27.00 (from $25.00). Our new price target includes roughly half of the estimated upside from higher ROEs. We have used 50% of the potential upside to account for uncertainty as to whether provincial regulators will follow the NEB's lead and increase allowed returns and if they do, how much the increased ROEs will be.
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Post by Sensei »

jay wrote:Can someone please shed some light as to why great names like FTS and TRP are close to their 52 weak lows when major indices are ~25% above?

Thanks
I don't think you will see much appreciation in share price with this type of stock. They are somewhat different businesses, but generally could be termed the intermediaries between the fuel supply and the market. Price range for their services is limited but fairly dependable. Their service is difficult to replicate, so a good high moat business to own. They should be bought for their dividend paying qualities and to smooth out market bottoms like this one.

FTS - 10 years of dividends / 7 years of dividend increases
TRP - 10 years of dividends / 4 years of (modest) increases

www.dividendinvestors.ca

I own both.
Cheers

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Post by JaydoubleU »

Actually, FTS has 36 consecutive years of dividend growth:

http://www.fortis.ca/investorcentre/for ... story.aspx

The present weakness might be explained by the modest yield, less than what's available from many corporate bonds or preferred shares. The recent 4 cents a year dividend increase was underwhelming, but last year it was raised 19%. FTS is currently attractively priced for income investors as a long term core holding.

I also like TRP under $30. This will be a year of flat or slightly declining earnings growth, but 2010 and beyond looks very promising.
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Post by 2 yen »

I have an order in for TRP at $29 and consider Fortis a core holding.
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Post by brad911 »

2 yen wrote:...and consider Fortis a core holding.
Ditto. When I consider at how cheap I've purchased some of the stocks in my portfolio I don't mind paying a little bit of a premium for a high quality company.

Would I like to see it cheaper? Sure...but I'm realistic in the fact that I'd rather have it over the next 20 years then always be moaning about the fact its "not quite as cheap as I'd like." There are times when you pay for quality and FTS, for my portfolio, is one of few that I don't mind paying a higher P/E for limited growth prospects. That being said they do have operations outside of Canada that I would expect them to build upon over the next decade.
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Post by iluvnascar »

JaydoubleU wrote:Actually, FTS has 36 consecutive years of dividend growth:

http://www.fortis.ca/investorcentre/for ... story.aspx

The present weakness might be explained by the modest yield, less than what's available from many corporate bonds or preferred shares. The recent 4 cents a year dividend increase was underwhelming, but last year it was raised 19%. FTS is currently attractively priced for income investors as a long term core holding.

I also like TRP under $30. This will be a year of flat or slightly declining earnings growth, but 2010 and beyond looks very promising.
Thanks for that link! Their 36-year history of increases is the stat I remember....and it really is quite amazing. I can't think of a better buy in this kind of market. It's been sold off the last few days as the "smart??" money moves into cyclicals for the forthcoming boom times. Trouble is....I don't really see boom times ahead for the forseeable future!
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Post by scomac »

iluvnascar wrote:It's been sold off the last few days as the "smart??" money moves into cyclicals for the forthcoming boom times. Trouble is....I don't really see boom times ahead for the forseeable future!
Yup. We're seeing the same sort of trading activity going on with MRU.A as well; another of those good place to be in tough times stocks.
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Post by investor99 »

Last week:

"Safe"
FTS -1.8%
JNJ -1.3%
MRU +0.3%
TRP -0.5
Loblaw -1.5%
Kroger -2.6%
Saputo -1.4%

Reference:
S&P 500 +3.3%
Home Depot +5.8%
Google +6.4%
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Post by Michael D »

Good list! From my list I can add:

Shoppers Drug Mart SC -1.78%
Shaw SJR.B -2.41%
Rogers RCI.B -2.41
Stryker SYK -3.09%

On the other side
Johnson Controls JCI +24%
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Post by JaydoubleU »

RCI.B is one I'm finding hard to understand. Is it just too low a yield and too high a P/E that is keeping it down? I was actually pretty happy with the 16% dividend increase... woops! This is the FTS thread.

Anyway, add RCI.B to the list, including FTS, TRP, SAP, of "relatively stable" dividend growers being shunned in favor of the financials, cyclicals. Short-term money/thinking at play creates opportunity for long term investors :)
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Post by skepticus »

A more cautious view of FTS by knowledgeable blogger Thicken My Wallet in a December post:
Fortis has an interest coverage ratio of 1.73 (this is a ratio measuring earnings before interest and tax over interest expenses; or, it measures how easily a company can pay back debt). This is not a great ratio...
You'll find the complete post at: http://www.thickenmywallet.com/blog/wp/ ... tegorized/

Scroll down to Fortis: Welcome to the Future ?
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Post by rhenderson »

Methinks I'll stick with David Baskin, it was his top pick as recent as Feb/09 and RBC recently raised their target.


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Post by JaydoubleU »

It is normal for utilties to carry relatively high debt loads. Look at TRP or ENB.
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Post by Shifty »

Wasn't yesterday supposed to be Q1 reporting for FTS? Can't find any info as of yet.
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Post by Peculiar_Investor »

Shifty wrote:Wasn't yesterday supposed to be Q1 reporting for FTS? Can't find any info as of yet.
From their Investor Information webpage, http://www.fortisinc.com/InvestorCentre/ they are saying Q1 earnings expected on April 30th.
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Post by investor99 »

While increased earnings in Fortis Inc.'s (FTS.T) regulated electric utilities operations in western Canada were partly offset by lower earnings in its Caribbean regulated utilities and Fortis Properties divisions, the company was still able to generate slightly stronger earnings in its latest quarter.

First-quarter earnings rose to C$92 million or 52 Canadian cents a share from C$91 million or 55 Canadian cents a year earlier. There were about 13% more shares outstanding in the latest period.

Analysts expected earnings of 57 Canadian cents a share in the first quarter.
Earnings were up 1% but because they issued shares EPS was down 5.5%.
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Post by BRIAN5000 »

Is today or tomorrow the last day to buy FTS and still get the dividend?

Ex day is May 6 so if I buy on May 1 settlement would be May 6?
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Post by broke »

If may 6 is the ex div day then may 6th
is a day the stock is sold without (ex) the div
and
is also the day the stock is bought without(ex) the div

therefore you need to buy may 5th or sooner to get it.

added
http://www.fortis.ca/investorcentre/for ... dends.aspx
2q/09 date of record is may 8th, your settlemnet date needs to be on or before that date.
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